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HMRC internal manual

Business Income Manual

Capital/revenue divide: intellectual property: contents

The capital/revenue divide has figured in a number of cases involving intellectual property rights - both in relation to income and to expenditure.

You may usefully consider an author’s fixed capital to be their brain. The fruits of the author’s endeavours (manuscripts, published material, film and other such rights, etc) represent the author’s stock in trade. Amounts received by the author for sale or exploitation of their stock in trade are likely to be revenue. The costs incurred by an author in creating works for publication are also likely to be revenue.

Corporation Tax intangible assets regime

Under the Corporation Tax intangible fixed assets regime, capital receipts and expenditure relating to intangible assets, including intellectual property, are normally brought into the computation of trading profits in accordance with their accounting treatment. The capital/revenue divide therefore has no effect for assets within the regime. Broadly, intellectual property created or acquired on or after 1 April 2002 by a corporate taxpayer is covered by the regime. See BIM35501.

This chapter covers the following: