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HMRC internal manual

Capital Allowances Manual

Patents: Sale of patent rights: General

ICTA88/S524 (1) and (3), ITTOIA/S587 - S590

Profits from the sale of patent rights received by:

  • a person who is resident in the UK, or
  • a person who is not resident in the UK from the sale of rights in a UK patent,


are chargeable to tax; if the seller is a company the charge is made under Case VI Schedule D.

The chargeable amounts are generally spread over a number of chargeable periods see CA75210.

In cases within a the patent rights need not be rights in a UK patent. For example, a person resident in the UK who receives a capital sum from the sale of US patent rights is chargeable on that capital sum.

The profits from a sale of patent rights are any capital sum received less any capital sums paid by the seller when the patent rights were purchased and any incidental expenses of the sale.

Example Thomas is UK resident. He buys patent rights in 2006 for a capital sum of £5,000. He sells the rights for the following capital sums:

  • part of the rights for £1,000 in 2007;
  • part in 2008 for £5,500; and
  • the rest in 2009 for £2,000.


This is how Thomas is taxed.

There is no charge on the first sale because the amount Thomas gets is less than the amount he paid for the rights.

Of the capital sum received in 2008 £1,500 (= £1,000 + £5,500 - £5,000) is taxable.

All of the £2,000 he receives in 2009 is taxable.