»Ê¹ÚÌåÓýapp

CAA01/S472, S476 - S477

»Ê¹ÚÌåÓýappre is a balancing allowance for a chargeable period if:

• that chargeable period is the period in which the trade permanently ceases, or
• it is the chargeable period in which the last of the patent rights in the non-trade pool comes to an end and the pool for the chargeable period exceeds any disposal values.

»Ê¹ÚÌåÓýapp balancing allowance is the amount by which the pool exceeds the disposal values.

»Ê¹ÚÌåÓýappre is a balancing charge if the pool for a chargeable period is less than the disposal values for that chargeable period. »Ê¹ÚÌåÓýapp balancing charge is the difference between the pool and the disposal values.

»Ê¹ÚÌåÓýapp disposal value of patent rights is the net proceeds of sale. Disposal value is restricted to cost unless the patent rights were acquired in a connected person transaction or a series of connected person transactions. In such a case the limit on disposal value is the greatest amount of capital expenditure incurred by any of the people involved in those transactions. If the disposal is restricted to original cost any excess will be taxable under Case VI for a company or assessable to income tax for an individual CA75200.

Example David, Stephen and Graham are connected. David buys patent rights for £11,000. He sells them to Stephen for £10,000 who then sells them to Graham for £9,000. If Graham sells the rights for £12,000 the limit on his disposal value is £11,000, the amount David paid for the rights. It is not £9,000, the amount Graham paid to Stephen for the rights.

»Ê¹ÚÌåÓýappre may be a series of sales of patent rights. If there is the total of the disposal values brought to account in the capital allowance computation cannot exceed the original capital expenditure incurred. Any excess will be taxed under Case VI for a company or assessable to income tax for an individual.

Example Eric spends £10,000 on buying patent rights and claims capital allowances. He grants a licence to Geoff for £6,000. He has to bring a disposal value of £6,000 to account then. If Eric grants a licence next year to Jack for £6,000 the disposal value that he has to bring to account is £4,000. »Ê¹ÚÌåÓýapp original capital expenditure was £10,000 and £6,000 was treated as disposal value when Eric granted the licence to Geoff. This means that any later disposal value is restricted to £4,000 (=£10,000 - £6,000). »Ê¹ÚÌåÓýapp remaining £2,000 he received when he granted the licence to Jack is assessed to income tax.