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HMRC internal manual

Capital Allowances Manual

HM Revenue & Customs
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Know-how: Treatment of receipts

ICTA88/S531 (4), ITTOIA/S583

Treat a receipt from a disposal of know-how which is not brought to account as a disposal value, and:

  • not chargeable to tax as an income or revenue receipt under general law,



  • treated as a trade receipt CA72400,



  • dealt with as a payment for goodwill CA72300,


as a profit or gain chargeable under Case VI of Schedule D for a company or as profits assessable to income tax for an individual.

The sort of cases where this applies are cases like the situation where know-how built up by the trading members of a group of companies is exploited by a non-trading holding company.

Where the disposal of know-how gives rise to a Case VI charge or is assessable to income tax under ITTOIA/S583 deduct any expenditure incurred by that person wholly and exclusively in the acquisition or disposal of the know-how in arriving at the amount chargeable Case VI. This does not apply if a deduction can be made for the expenditure under some other provision.

Where the taxpayer is an individual who devised the know-how, whether alone or jointly with any other person, the income should be treated as earned income.