Income Tax (Trading and Other Income) Act 2005 section 598

Rights to acquire future patent rights

Section 598 deals with the tax treatment of payments made to secure the right to acquire patent rights in the future, where the patent has not yet been granted.

• A payment to obtain a right to acquire future patent rights is treated as a purchase of patent rights by the payer and a sale of patent rights by the recipient.
• The recipient of such a payment is chargeable to income tax on the capital sum received, just as if they had sold actual patent rights.
• If the payer subsequently acquires the actual patent rights, the original payment is treated as expenditure on purchasing those rights, allowing potential tax relief when those rights are later disposed of.
• A "right to acquire future patent rights" means a right to acquire patent rights relating to an invention for which the patent has not yet been granted.