Income Tax (Trading and Other Income) Act 2005

338 (1) Amend section 833 (interpretation of Income Tax Acts) as follows.

(2) In subsection (3)—

(a) for “section 550” substitute “sections 535 to 537 of ITTOIA 2005”, and

(b) in paragraph (b)—

(i) for “547(1)(a)” substitute “465 of ITTOIA 2005”, and

(ii) for “547(5)” substitute “530 of that Act”.

(3) In subsection (4)—

(a) for “and” in the first place where it occurs substitute “to”, and

(b) in paragraph (c) for the words from “under” to “D” substitute “under Part 2 of ITTOIA 2005 (trading income)”.

(4) In subsection (5) for “income which is earned income by virtue of section 529” substitute “—

(a) income to which subsection (5A) applies, and

(b) income to which subsection (5B) applies.”

(5) After that subsection insert—

“(5A) This subsection applies to income arising to the individual if—

(a) it is charged to tax under section 583 of ITTOIA 2005 (income from disposals of know-how), and

(b) the individual, alone or jointly, devised the know-how in question.

(5B) This subsection applies to income arising to the individual if—

(a) it is patent income, and

(b) the individual, alone or jointly, devised the invention for which the patent in question was granted.

This is subject to subsection (5C).

(5C) If—

(a) any part of the rights in respect of the patent, or of any rights out of which they were granted, has at any time belonged to any other person, and

(b) any part of the income is properly attributable to the rights which have belonged to that other person,

subsection (5B) does not apply to that part of the income (and so it is not earned income).

(5D) In subsection (5B) “patent income” means—

(a) royalties or other sums paid in respect of the use of a patent charged to tax under section 579 of ITTOIA 2005,

(b) amounts on which tax is payable under section 587 or 593 of ITTOIA 2005, and

(c) amounts on which tax is payable under—

(i) section 472(5) of the Capital Allowances Act (patent allowances: balancing charges), or

(ii) paragraph 100 of Schedule 3 to that Act (balancing charges in respect of pre-1st April 1986 expenditure on the purchase of patent rights).

(5E) References in subsection (5C) to the rights in respect of the patent are to any right to do or authorise the doing of anything which would, but for the right, be an infringement of the patent.”