Income Tax Act 2007 section 910

Proceeds of a sale of patent rights: payments to non-UK residents

Section 910 requires the person paying proceeds from the sale of patent rights to a non-UK resident seller to deduct income tax at the basic rate from the capital element of those proceeds before making payment.

• When a non-UK resident sells patent rights and is chargeable to income tax or corporation tax on the sale, the person paying the proceeds must deduct income tax at the basic rate from the capital element of the payment.
• The chargeable amount on which tax is deducted is the capital sum element of the proceeds (or instalment), reduced by any incidental expenses of the sale that are deducted before payment.
• The rules extend to licences connected with patents and rights to acquire future patent rights, and the definition of "capital sum" excludes amounts already brought into account as trading profits or employment earnings.
• Even where the seller is entitled to deductions or spreading relief for their own tax purposes (such as deducting the original acquisition cost or spreading the proceeds over several years), these do not reduce the amount of tax that the payer must withhold.