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HMRC internal manual

Capital Allowances Manual

Patents: Allowances: Expenditure incurred before 1 April 1986

CAA01/SCH3/PARA92 - 102

Expenditure incurred on the purchase of patent rights before 1 April 1986 is written off on a straight-line basis. The writing down period is normally 17 years and so the annual allowance is one-seventeenth of the expenditure. The writing down period is less than 17 years in these two cases:

  • the rights were bought for a period of less than 17 years; in that case the writing down period is the number of years for which the rights were purchased, or
  • the rights that were bought begin more than one year after the commencement of the patent; in that case the writing down period is 17 years less than the number of complete years that had elapsed when the rights began.


There is a balancing charge where patent rights are sold in whole or in part and the net capital proceeds of sale exceed the capital expenditure remaining unallowed. The balancing charge is equal to the excess.

There is a balancing allowance where patent rights lapse or are sold and there is capital expenditure remaining unallowed which exceeds the net proceeds of sale. The balancing allowance is the amount of that excess.