Part 9Intellectual property: know-how and patents
Chapter 2Disposals of know-how
908Charge to tax on profits from disposals of know-how
1
The charge to corporation tax on income applies to profits arising where consideration is received by a company—
a
for the disposal of know-how, or
b
for giving, or wholly or partly fulfilling, an undertaking which—
i
is given in connection with a disposal of know-how, and
ii
restricts or is designed to restrict any person's activities in any way.
2
For the purposes of subsection (1)(b), it does not matter whether or not the undertaking is legally enforceable.
3
Subsection (1) is subject to the exceptions in section 909.
4
In this Chapter “know-how” means any industrial information or techniques likely to assist in—
a
manufacturing or processing goods or materials,
b
working a source of mineral deposits (including searching for, discovering or testing mineral deposits or obtaining access to them), or
c
carrying out any agricultural, forestry or fishing operations.
5
In subsection (4)—
a
“mineral deposits” includes any natural deposits capable of being lifted or extracted from the earth and for this purpose geothermal energy is treated as a natural deposit, and
b
“source of mineral deposits” includes a mine, an oil well and a source of geothermal energy.
909Exceptions to charge under section 908
1
Section 908 does not apply in the following cases.
2
Case A is if the consideration is brought into account under section 462 of CAA 2001 (disposal values).
3
Case B is if the consideration is dealt with in relation to the company receiving it as a trading receipt under section 177(2) (disposal of know-how if trade continues to be carried on).
4
Case C is if the consideration is dealt with in relation to the person receiving it as a capital receipt for goodwill under section 178(2) (disposal of know-how as part of disposal of all or part of a trade).
5
Case D is if the disposal of the know-how is by way of a sale and—
a
the buyer is a body of persons over which the seller has control,
b
the seller is a body of persons over which the buyer has control, or
c
the buyer and the seller are both bodies of persons and another person has control over both of them.
6
In subsection (5) “body of persons” includes a firm.
910Profits charged under section 908
1
The profits charged under section 908 are—
a
the amount of the consideration, less
b
any expenditure incurred by the company wholly and exclusively in the acquisition or disposal of the know-how.
2
Such expenditure may not be taken into account more than once, whether under this section or otherwise.
3
This section needs to be read with section 926 (contributions to expenditure).