Taxes Consolidation Act 1997 section 756

Effect of lapse of patent rights

Section 756 provides for balancing allowances and balancing charges where patent rights, in respect of which writing-down allowances have been claimed, come to an end or are sold before the expiry of the writing-down period.

• Where patent rights lapse or are sold before the end of the writing-down period, further writing-down allowances cease; a balancing allowance or balancing charge is made instead to ensure the correct overall amount of relief is given.
• A balancing allowance equal to the unallowed expenditure (less any sale proceeds) is given where the rights lapse or are sold for less than the expenditure remaining unallowed; a balancing charge arises where sale proceeds exceed the unallowed expenditure.
• Where only part of the rights are sold and no balancing charge arises, future writing-down allowances are recalculated by reference to the reduced unallowed expenditure spread over the remaining complete years of the writing-down period.
• A balancing charge cannot exceed the total writing-down allowances actually made, and the section does not apply where the company has claimed relief for the patent rights under the intangible assets scheme (section 291A).