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Effect of lapse of patent rights, sales, etc.
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286.—(1) Where, on or after the operative date, a person incurs capital expenditure on the purchase of patent rights and, before the end of the relevant years of assessment, any of the following events occurs:
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(a) the rights come to an end without being subsequently revived;
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(b) he sells all those rights or so much thereof as he still owns;
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(c) 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 capital expenditure remaining unallowed;
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no annual allowance shall be made to that person for the year of assessment in his basis period for which the event takes place or any subsequent year of assessment.
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(2) Where, on or after the operative date, a person incurs capital expenditure on the purchase of patent rights and, before the end of the relevant years of assessment, either of the following events occurs:
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(a) the rights come to an end without being subsequently revived;
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(b) 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 capital expenditure remaining unallowed;
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there shall, subject to and in accordance with the following provisions of this Chapter, be made to him for the year of assessment, in his basis period for which the event takes place, an allowance (in this Chapter referred to as a balancing allowance) equal, if the event is the rights coming to an end, to the amount of the capital expenditure remaining unallowed, and, if the event is a sale, to the amount of the capital expenditure remaining unallowed less the net proceeds of the sale.
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(3) Where a person who, on or after the operative date, has incurred capital expenditure on the purchase of 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 capital expenditure remaining unallowed, if any, there shall, subject to and in accordance with the following provisions of this Chapter, be made on him for the year of assessment, in his basis period for which the sale takes place, a charge (in this Chapter referred to as a balancing charge) on an amount equal to the excess or, where the amount of the capital expenditure remaining unallowed is nil, to the said net proceeds.
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(4) Where a person who, on or after the operative date, has incurred capital expenditure on the purchase of patent rights sells a part of those rights and subsection (3) does not apply, the amount of any annual allowance made in respect of that expenditure for the year of assessment in his basis period for which the sale takes place or any subsequent year of assessment shall be the amount arrived at by—
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(a) 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
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(b) dividing the result by the number of the relevant years of assessment which remained at the beginning of the year of assessment in his basis period for which the sale takes place,
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and so on for any subsequent sales.
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(5) References in the preceding provisions of this section to the amount of any capital expenditure remaining unallowed shall, in relation to any event, be construed as references to the amount of that expenditure less any annual allowances made in respect thereof for years of assessment before the year of assessment in the basis period for which that 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.
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(6) Notwithstanding anything in the preceding provisions of this section, no balancing allowance shall be made in respect of any expenditure unless an annual allowance has been, or, but for the happening of the event giving rise to the balancing allowance, could have been, made in respect of that expenditure, and the total amount on which a balancing charge is made in respect of any expenditure shall not exceed the total annual 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.
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