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HMRC internal manual

Capital Allowances Manual

From
HM Revenue & Customs
Updated
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Know-how: Allowances: Qualifying expenditure

CAA01/S454 - S455

The expenditure which qualifies for know-how allowances is called qualifying expenditure. Capital expenditure incurred by a person on the acquisition of know-how is qualifying expenditure if one of the following conditions is satisfied.

  • The know-how is acquired for use in a trade which the person is carrying on when the know-how is acquired.
  • The know-how is acquired for use in a trade which the person sets up and commences after the acquisition of the know-how.
  • The know-how is acquired together with the trade or part trade in which it is used and the parties to the transaction make an election to avoid goodwill treatment CA72300.
  • The know-how is acquired together with the trade or part trade in which it is used and that trade or part trade was carried on wholly outside the UK before the acquisition.

 

Expenditure on know-how acquired in a control transaction is not qualifying expenditure and so know-how acquired in a control transaction does not qualify for capital allowances. A control transaction is one where the seller controls the buyer or the buyer controls the seller or some other person controls both the buyer and the seller.

Expenditure is not qualifying expenditure if it is already deductible for tax purposes.