Income Tax (Trading and Other Income) Act 2005 section 588

Income charged under section 587

Section 588 sets out how to calculate the taxable profit when a person sells all or part of their patent rights, including which costs may be deducted from the sale proceeds.

• Taxable profit is the capital sum received from the sale of patent rights, less deductible costs
• Deductible costs comprise the original capital cost of the rights sold plus any incidental expenses of sale
• Where the seller previously purchased the rights and has already sold part of them for a capital sum, the original capital cost must be reduced by that earlier capital sum
• The calculation is also subject to rules on relief for expenses and contributions to expenditure, as well as spreading rules that may allow the profit to be taxed over more than one year