Part 8

Patent allowances
Chapter 4

Giving effect to allowances and charges

Persons having qualifying trade expenditure
478
An allowance or charge to which a person is entitled or liable under this Part for a chargeable period in respect of qualifying trade expenditure is to be given effect in calculating the profits of the trade, by treating—
a
the allowance as an expense of the trade, and
b
the charge as a receipt of the trade.

Persons having qualifying non-trade expenditure: income tax
479
1
This section applies for income tax purposes if a person is entitled or liable under this Part to an allowance or charge for a chargeable period (“the current tax year”) in respect of qualifying non-trade expenditure.
2
An allowance is to be given effect by deducting it from or setting it off against the person’s income from patents for the current tax year.
2A
The allowance is given effect at Step 2 of the calculation in section 23 of ITA 2007.
3
If the amount to be deducted from or set off against the person’s income from patents for that tax year exceeds the amount of that income, the excess must be deducted from or set off against the person’s income from patents for the next tax year, and so on for subsequent tax years.
4
A charge is to be given effect by treating the charge as income to be assessed to income tax.

Persons having qualifying non-trade expenditure: corporation tax
480
1
This section applies for corporation tax purposes if a company is entitled or liable under this Part to an allowance or charge for a chargeable period (“the current accounting period”) in respect of qualifying non-trade expenditure.
2
An allowance is to be given effect by deducting it from the company’s income from patents for the current accounting period.
3
If the amount to be deducted from the company’s income from patents for that period exceeds the amount of that income, the excess must (if the company remains within the charge to tax) be deducted from its income from patents for the next accounting period, and so on for subsequent accounting periods.
4
A charge is to be given effect by treating the charge as income of the company from patents.
S. 45H(2) modified (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 7
Words in s. 479(4) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 565 (with Sch. 2 )
S. 479(2A) inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 408 (with Sch. 2)