Section 194 | Disposal of know-how as part of disposal of all or part of a trade

(1)This section applies if —

(a)a person carrying on a trade receives consideration for the disposal of know-how which has been used in the trade, and

(b)the know-how is disposed of as part of the disposal of all or part of the trade.

(2)If the person disposing of the know-how is within the charge to income tax, the consideration is treated for income tax purposes as a capital receipt for goodwill.

(3)If the person acquiring the know-how—

(a)is within the charge to income tax, and

(b)provided the consideration,

the consideration is treated for income tax purposes as a capital payment for goodwill.

(4)But the consideration is not treated for income tax purposes as a capital payment for goodwill if, before the acquisition, the trade was carried on wholly outside the United Kingdom.

(5)If the person disposing of the know-how is within the charge to income tax—

(a)that person, and

(b)the person acquiring the know-how (whether or not within the charge to income tax),

may jointly elect for this section not to apply (but see section 195).

(6)The election must be made within two years of the disposal.

(7)If—^F1

(a)an election is made under section 178 of CTA 2009 (corresponding corporation tax provision), and^F2

(b)the person making the acquisition mentioned in that section is within the charge to income tax,^F1

the persons making the election under that section are treated as also making an election under this section (even though the person disposing of the know-how is not within the charge to income tax).