Capital Allowances Act 2001 section 481

Anti-avoidance: limit on qualifying expenditure

Section 481 limits the amount of qualifying expenditure a buyer can claim when purchasing patent rights in circumstances involving connected parties or tax-avoidance motives.

• The restriction applies where the buyer and seller are connected, or where the main benefit of the transaction is obtaining capital allowances
• Any excess of the purchase price over the "relevant limit" is excluded from qualifying expenditure
• The relevant limit is set by reference to the seller's disposal value or the capital sum chargeable to tax on the seller, depending on the seller's tax position
• Where neither of those measures applies, the limit is the lowest of the market value of the rights, the seller's original capital expenditure, or a connected person's capital expenditure on acquiring the rights