Income Tax (Trading and Other Income) Act 2005 section 590

UK resident sellers: spreading rules

Section 590 sets out how income from the sale of patent rights is spread for tax purposes when the person liable to tax is a UK resident.

• Where sale proceeds are received as a lump sum, one-sixth of the taxable amount is charged in the year of receipt and in each of the next five tax years, spreading the charge over six years in total.
• Where sale proceeds are received in instalments, one-sixth of the taxable amount relating to each instalment is charged in the year that instalment is received and in each of the next five tax years.
• The seller may elect to be taxed on the full amount (or the full amount of any instalment) in the single tax year of receipt, instead of spreading it over six years.
• Any such election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year in question.