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HMRC internal manual

Capital Allowances Manual

Patents: Allowances: How allowances are given and charges made

CAA01/S478 - S480

Treat a patent allowance in respect of qualifying trade expenditure as a trading expense and a balancing charge as a trading receipt. A patent allowance in respect of qualifying non trade expenditure is deducted from or set off against income from patents for the year for which the allowance is due, and any excess is carried forward and set against income from patents in future years. A balancing charge in respect of qualifying non-trade expenditure is assessed to income tax and treated as income from patents in corporation tax cases.