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HMRC internal manual

Capital Allowances Manual

Patents: Sale of patent rights: Death of seller


An individual who receives a capital sum for the sale of patent rights, which is chargeable over 6 years, may die before the 6 years end. In that case no charges are made for years after the year of death. Amounts that would have been chargeable in years after the year of death are added to the amount chargeable for the year of death.

Similar rules apply where a company is wound up or the trade carried on by a partnership is discontinued.

Example Jane receives a capital sum of £12,000 in June 2005, which is chargeable under ICTA88/S524. She is chargeable on £2,000 for each of 2005/06 to 2010/11. She dies in January 2008. This means that the last year for which a charge can be made is 2007/08. The amount chargeable in 2007/08 is £8.000 (= £2,000 for 2007/08 plus £2,000 for each of 2008/09, 2009/10 and 2010/11).

Where an individual dies the personal representatives may give the Inspector notice to have the tax payable recalculated. The increased tax payable because of the death is reduced to the amount which would have been payable if the whole capital sum had been charged in equal amounts over the period beginning with the year in which it was received and ending with the year of death. The time limit for the notice is not later than 30 days after notice is served on the personal representatives of the tax payable as a result of the death.

Example Jane’s personal representatives in the example above can serve notice on the Inspector. If they do the tax payable is reduced to the amount which would have been payable if the £12,000 had been spread over the years 2005/06 (the year in which the lump sum was received) to 2007/08 (the year of death).

Where a trade carried on by a partnership is discontinued and there is an additional amount chargeable for the year of discontinuance that additional amount is to be apportioned between the partners immediately before the discontinuance. A separate charge is made on each partner. Each partner, or the personal representatives of a partner who has died, can give notice requiring the tax to be reduced just as the personal representatives of an individual who has died can.