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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: payment of royalties etc.

S59 Corporation Tax Act 2009

Use of patent

Corporation Tax

It is a specific statutory rule that no deduction is allowed for royalties or other sums paid for the use of patents. For most patent royalties, however, this rule is overridden by the rules of the intangible fixed assets regime (see CIRD10000 onwards).

Income Tax

There is no statutory rule prohibiting a deduction for patent royalties in calculating trade profits. A deduction is admissible on ordinary principles.

For Income Tax, copyright royalties paid for the purposes of a trade are admissible as a deduction. For Corporation Tax purposes, copyright royalties are dealt with under the rules of the intangible fixed assets regime (see CIRD10000 onwards).

Registered designs & trade marks

A design registered under the Registered Designs Act 1949 and the Copyright, Designs and Patents Act 1988 Part III, is, by those Acts, made the subject of a design right, which is similar to a copyright. Royalties are dealt with for tax purposes in the same way as copyright.