Taxation of Chargeable Gains Act 1992 section 261A

Disposal of know-how as part of disposal of all or part of a trade

Section 261A deals with the capital gains tax treatment of consideration received for know-how disposed of as part of a sale of all or part of a trade, ensuring it is treated consistently with its income tax treatment as a goodwill payment.

• The section applies when a trader disposes of know-how that has been used in the trade, and the disposal forms part of a sale of all or part of the trade
• Where income tax legislation treats the consideration as a capital receipt or capital payment for goodwill, the same treatment applies for capital gains tax purposes
• The effect is that the know-how element is re-characterised as goodwill for both income tax and capital gains tax, ensuring a consistent tax treatment across both taxes
• The section operates as though it were part of Chapter 14 of Part 2 of the Income Tax (Trading and Other Income) Act 2005, which contains the corresponding income tax rules on know-how disposals