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HMRC internal manual

Business Income Manual

Specific deductions: patents and royalties: expenditure on acquisition of know-how

There is general guidance as to the meaning of know-how at CA70010. Broadly, ‘know-how’ consists of manufacturing techniques, technical knowledge and secret processes

For Corporation Tax purposes, know-how is dealt with under the intangible fixed assets regime (see CIRD10000 onwards). Certain acquisitions of know-how by a company are excluded from the regime under its commencement rules where the acquisition is from a related party.

If the intangible asset regime does not apply, acquisition of know-how is generally dealt with, for Income Tax and Corporation Tax purposes, as part of the capital allowance system. For guidance see CA70010 onwards.

If there is a question as to whether the payments for know-how have a revenue character, this will need to be judged on its particular facts, in line with the principles explained at BIM35000 onwards. You may also need to distinguish between payments for know-how, and franchise fees. Franchising is covered at BIM57600 onwards.

The guidance on receipts from know-how can be found at CA72000 onwards.