Income Tax (Trading and Other Income) Act 2005 section 862

Sale of patent rights: effect of later cessation of trade

Section 862 deals with what happens to outstanding income tax charges on patent rights sale proceeds when a partnership trade ceases entirely and no former partner continues to carry on the trade.

• Where patent rights were sold as part of a partnership trade and income tax is being charged in instalments on the proceeds, a complete cessation of the trade triggers this section — but only if no person who was trading immediately before cessation continues immediately afterwards.
• Any amounts that would have been taxable in later tax years are accelerated and charged instead in the tax year in which the trade ceases, creating a "rolled-up" charge.
• The person liable may elect to spread the rolled-up charge evenly across the tax years from the year the sale proceeds were originally received through to the year of cessation, thereby reducing the income tax payable to what it would have been under that spreading.
• The election must be made no later than one year after the normal self-assessment filing date for the tax year of cessation.