Commentary on Sections Overview Chapter 3: Sales of Patent Rights Section 916: Non-UK resident companies: proceeds of sale not received in instalments
2319.This section sets out how non-UK resident companies are taxed on capital sums from the sale of patent rights if the sale proceeds are not received in instalments. It is based on section 524 of ICTA. The corresponding rule for income tax is in section 591 of ITTOIA.
2320.Subsection (4) states the time limit for making an election under subsection (3). The reference in section 524(6) of ICTA to “the Board” has not been reproduced and this section does not specify to whom the election must be made. But the general rules about claims and elections in Schedule 18 to FA 1998 require elections to be made in a return or, if that is not possible, to an “officer of Revenue and Customs” in accordance with Schedule 1A to TMA. This change reproduces Change 149 in ITTOIA and so brings the income and corporation tax codes back into line. See Change 1 in Annex 1.
2321.A non-UK resident company is within the charge to corporation tax in respect of sales of patent rights only if it is carrying on a trade in the UK through a UK permanent establishment and the patent is held for that trade (see section 19). Subsection (5) of this section (and of section 917) is relevant if such a company, having elected for spreading under subsection (3) of this section (or of section 917) ceases within the maximum allowed spreading period of six years to be within the charge to corporation tax in respect of the trade it was carrying on through its UK permanent establishment. If (for example) in year four the company ceased to carry on the trade through a UK permanent establishment then the capital sum would be spread rateably over four years and any earlier spreading based on a presumption that it would continue to carry on the trade in the UK through a UK permanent establishment for the whole six years would be revised in accordance with subsection (6) of this section (or of section 917).