Clause 10

Subject to this section, where on or after 1st April, 1980, a person carrying on a manufacturing trade or business has incurred capital expenditure in acquiring any approved know-how or any approved patent rights for use in that trade or business (hereinafter in this section referred to as the relevant trade or business), writing-down allowances in respect of that expenditure shall be made to him during a writing-down period of five years beginning with the year of assessment relating to the basis period in which that expenditure is incurred.(2) The writing-down allowance to be made to a person under this section for any year of assessment shall be an amount equal to twenty per cent of the expenditure incurred by him on the acquisition of the approved know-how or patent rights, as the case may be.(3) Any expenditure incurred on the acquisition of any approved know-how or patent rights by a person before the commencement of his trade or business shall be treated for the purpose of this section as if it had been incurred by him on the first day he commences that trade or business.(4) Where writing-down allowances have been made to any person under this section in respect of any approved patent rights and, before the end of the writing-down period, any of the following events occurs, that is to say: —

the rights come to an end without being subsequently revived;

he sells all those rights or so much thereof as he still owns; or

he sells part of those rights and the net proceeds of the sale (so far as they consist of capital sums) are not less than the amount of the expenditure remaining unallowed,no writing-down allowance in respect of the approved patent rights shall be made to that person for the year of assessment relating to the basis period in which the event occurs or for any subsequent year of assessment.(5) Where writing-down allowances have been made to any person under this section in respect of any approved patent rights and, before the end of the writing-down period, either of the following events occurs, that is to say: —

the rights come to an end without being subsequently revived; or

he sells all those rights, or so much thereof as he still owns, and the net proceeds of the sale (so far as they consist of capital sums) are less than the amount of the expenditure remaining unallowed,there shall be made to him for the year of assessment relating to the basis period in which the event occurs a balancing allowance equal, if the event is the rights coming to an end, to the amount of the expenditure remaining unallowed, and, if the event is a sale, to the amount of the expenditure remaining unallowed less the net proceeds of the sale.(6) Where a person to whom writing-down allowances have been made under this section in respect of any approved patent rights —

sells all or any part of those rights and the net proceeds of the sale (so far as they consist of capital sums) exceed the amount of the expenditure remaining unallowed, if any, there shall be made on him for the year of assessment relating to the basis period in which the sale occurs a charge (hereinafter in this section referred to as a balancing charge) on an amount equal to the excess or, where the amount of the expenditure remaining unallowed is nil, to the said net proceeds;

sells a part of those rights and paragraph (a) does not apply, the amount of any writing-down allowance made in respect of the capital expenditure incurred in acquiring the approved patent rights for the year of assessment relating to the basis period in which the sale occurs or any subsequent year of assessment shall be the amount arrived at by —

subtracting the net proceeds of the sale (so far as they consist of capital sums) from the amount of the expenditure remaining unallowed at the time of the sale; and

dividing the result by the number of complete years of the writing-down period remaining at the beginning of the year of assessment relating to the basis period in which the sale occurs,and so on for any subsequent sales.(7) References in subsections (5) and (6) to the amount of any expenditure remaining unallowed shall, in relation to any event, be construed as references to the amount of that expenditure less any writing-down allowances made in respect thereof for the years of assessment before the year of assessment relating to the basis period in which the event occurs, and less also the net proceeds of any previous sale by the person who incurred the expenditure of any part of the rights acquired by the expenditure, so far as those proceeds consist of capital sums.(8) Notwithstanding anything in subsection (6), the total amount on which a balancing charge is made in respect of any expenditure shall not exceed the total writing-down allowances actually made in respect of that expenditure, less, if a balancing charge has previously been made in respect of that expenditure, the amount on which that charge was made.(9) Where a person to whom writing-down allowances have been made under this section in respect of any approved know-how disposes of the approved know-how, the amount or value of any consideration received by him for the disposal shall, so far as it is not chargeable to tax as a revenue or income receipt, be treated for all purposes as a trading receipt of the relevant trade or business.(10) Where a person to whom writing-down allowances have been made under this section ceases to carry on the relevant trade or business, an allowance equal to the amount of the expenditure remaining unallowed in respect of the approved know-how or patent rights, as the case may be, shall be made to him in computing his income for the year of assessment relating to the basis period in which the cessation occurs.(11) In this section —“approved” means approved by the Minister or such person as he may appoint;“know-how” means any industrial information and techniques likely to assist in the manufacture or processing of goods or materials;“patent rights” means the right to do or authorise the doing of anything which would, but for that right, be an infringement of a patent.(12) For the purposes of this section —

any reference to the sale of part of patent rights includes a reference to the grant of a licence in respect of the patent in question, and any reference to the acquisition of patent rights includes a reference to the acquisition of a licence in respect of a patent;

any disposal or sale which occurs after the date on which the relevant trade or business permanently ceases, shall be deemed to have occurred immediately before the cessation.”.