Capital Allowances Act 2001 section 477

Limit on amount of disposal value

Section 477 caps the disposal value that must be brought into account when a person sells patent rights, ensuring it does not exceed the original capital expenditure on purchasing those rights.

• When patent rights are sold (whether in whole or in part), the disposal value brought into account is capped at the capital expenditure the seller originally incurred in purchasing those rights.
• This cap applies to the total of all disposal values where patent rights are sold in several parts over time.
• Where the rights were acquired through a transaction (or series of transactions) between connected persons, the cap is set at the highest capital expenditure incurred by any party in the chain of connected-person transactions.
• The connected persons rule prevents artificially low purchase prices between related parties from being used to reduce the disposal value limit.