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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Intellectual Property Rights: patents

A patent gives an inventor a territorial right for a limited period to stop others from making, using or selling an invention without permission. It generally covers products or processes that are concerned with how things work, how they are made or what they are made of. The basis for the patent system is that the inventor or deviser of an idea obtains a monopoly over that right for a limited time in exchange for providing the national government and the public with information about the invention which can be freely used after the expiry of the patent. The process of obtaining a patent usually takes between three to four years and can be expensive.

Once registered with the Patent Office, a patent usually lasts for 20 years.

As the rights under a UK Patent are protected only in the UK the inventor must apply for foreign patents if protection is required outside the UK.

The right to apply and own a patent usually rests initially with the inventor. However, if an invention is made by an employee in the UK in the course of his employment, the invention belongs to the employer provided it was reasonable to expect an invention to result from the employee’s duties, for example, an employee who works in research and development, or if the employee had a special obligation to further the employer’s interest, such as a company director.

Guidance on the tax treatment of transactions involving patents is available in the Capital Allowances Manual at CA75000+. Any consideration for the disposal of a patent that is chargeable to tax as income or is taken into account as a receipt in computing income profits or losses must be excluded from the consideration to be taken into account for CG purposes in accordance with TCGA92/S37(1). Where the consideration is taken into account for CG purposes the wasting asset provisions in TCGA92/S45 – TCGA92/S46 will apply where the term of a patent does not exceed 50 years.