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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Specific deductions: patents and royalties: costs of obtaining or extending patent rights

S89 Income Tax (Trading and Other Income) Act 2005, S89 Corporation Tax Act 2009

There is general guidance as to the meaning of a patent and the legal background at CA75000 onwards.

Expenses incurred for the purposes of a trade in obtaining the grant of, or the extension of the term of, a patent are admissible as a deduction in computing the profits of the trade. Expenses incurred in connection with unsuccessful applications for patents for the purposes of a trade are also allowable.

This rule does not apply to professions or vocations.

Corporation Tax

Although the above rule applies in principle for Corporation Tax purposes, for most expenses connected with patents it is overridden by the rules of the intangible fixed assets regime (see CIRD10000 onwards).

Devising a patent

The normal principles apply to determine whether or not expenditure incurred in devising a patent is allowable as a deduction in computing the profits of a trade. As regards revenue expenses incurred by non-traders, see CA75310. For companies consider also the possible application of research and development reliefs (see CIRD10500) and the application of the intangible fixed assets regime (see CIRD10000 onwards). For capital expenses, bear in mind the possible availability of research and development allowances (see CA60000 onwards).