Income Tax (Trading and Other Income) Act 2005 section 193

Disposal of know-how if trade continues to be carried on

Section 193 deals with how payments received for the disposal of know-how are taxed when the person selling the know-how continues to carry on the same trade.

• When a trader sells know-how used in their trade but continues trading, the payment received is generally treated as a taxable trading receipt
• This treatment does not apply where the know-how is sold as part of selling all or part of a trade, or where the seller and buyer are under common control
• If know-how is sold together with other assets as part of one transaction, the sale proceeds must be split on a just and reasonable basis to identify the amount relating to the know-how
• Where the apportionment of proceeds between know-how and other assets materially affects two or more taxpayers, a formal statutory procedure applies to resolve any disagreement