Part 8

Other reliefs
Chapter 6

Miscellaneous other reliefs

Patent royalty receipts

Spreading of patent royalty receipts
461
1
A person who makes a claim is entitled to a tax reduction for a tax year in which the person receives a payment of a royalty or other sum if—
a
the payment is in respect of the use of a patent,
b
the use of the patent has extended over a period of two years or more, and
c
the payment is one from which a sum representing income tax is required to be deducted under section 903.
2
The amount of the tax reduction is the difference between—
a
the amount of income tax payable by the person in respect of the payment, and
b
the total amount of income tax which would have been payable by the person in respect of the payment on the assumptions in subsection (3).
3
Those assumptions are that—
a
the payment was made in a number of equal instalments at yearly intervals,
b
the last instalment was paid on the date on which the payment was in fact made, and
c
the number of instalments was the same as the number of complete years in the period over which the use of the patent extended, but subject to a maximum of 6.
4
The tax reduction is given effect at Step 6 of the calculation in section 23.