Corporation Tax Act 2009 section 1272

Sale of patent rights: effect of later cessation of trade

Section 1272 deals with what happens to outstanding corporation tax charges on patent rights sales when the last corporate partner leaves a partnership trade.

• Where patent rights have been sold as part of a partnership trade and the profits are being taxed in instalments across future accounting periods under section 1271, a cessation event can accelerate the remaining charges.
• The trigger occurs when a corporate partner ceases to carry on the trade and no other company that was previously carrying on the trade continues in the partnership immediately after that cessation.
• Any amounts that would otherwise have been charged to corporation tax in accounting periods after the cessation are instead brought forward and charged in the accounting period in which the cessation takes place.
• The accelerated charge falls on the partners who were carrying on the trade immediately before the cessation, rather than being allocated by reference to profit-sharing arrangements over the whole of the final accounting period.