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The distinction between disposing of intellectual property as a capital asset and turning it to account to produce trading income should be straightforward. In practice, the exercise is complicated by a number of factors. Firstly, there is the mechanism of exclusive licensing, whereby the owner of rights puts it out of their power to exercise them to their own account but retains ownership and rights of action against third party infringers. Secondly, it is difficult to value intellectual property (see B5.302); often there are no direct comparables, so that percentage or per-item royalties are especially apt to achieve fairness between parties. Thirdly, intellectual property is often a product of the exercise of a trade or profession. Its creators are regarded differently from those who choose to purchase and invest.

The corporate tax treatment of intangible assets, including intellectual property, acquired or created on or after 1 April 2002 is set out in the corporate intangible regime as detailed in Division D1.6. The capital/revenue distinction is not relevant to assets dealt with under the regime.

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