RE2000 - Patents: expenses: outline of the relief

An individual may be granted a patent which gives him the sole right for a period to make, use or sell some invention. If he then allows someone to use his patent he may receive income for its use. We refer to this as patent income and allow relief against it for certain expenses the individual incurs in connection with the patent. He can get relief for fees or expenses he incurs in connection with

• the grant of a patent
• the maintenance of a patent
• the extension of the term of a patent
• an unsuccessful application for a patent.

The fees or expenses on which you can give relief must meet the test for allowable deductions in computing the profits of a trade for tax purposes. They must not however have actually been incurred for the purposes of a trade.

Instructions on

• patent expenses incurred for the purposes of a trade are at IM3690 onwards
• writing down and balancing allowances, and balance charges in respect of capital expenditure on the acquisition of patent rights are at CA5600 onwards.