HL Deb 19 February 1969 vol 299 cc817-9

2.46 p.m.

LORD TREFGARNE

My Lords, on behalf of my noble friend Lord Kinnoull, I beg leave to ask the Question standing in his name on the Order Paper.

[The Question was as follows:

To ask Her Majesty's Government whether they consider proper compensation is being offered to inventors on the payment of royalties in view of the present taxation system.]

LORD BESWICK

My Lords, income from patent royalties is subject to taxation, like other income. There are, however, provisions which could enable an initial payment to be spread over a num- ber of previous years. What I think the noble Earl may have in mind is the treatment for tax purposes of a payment to an inventor for the outright sale of his patent rights. The purchaser is allowed to deduct such a payment over a number of years in computing his taxable income or profits. The consideration money is treated as income in the hands of the inventor, and the assessments are similarly spread over a number of years. This situation is, of course, a factor which the parties take into account when they are negotiating the amount of the payment.

LORD TREFGARNE

My Lords, on behalf of my noble friend I should like to thank the noble Lord for his reply.

LORD INGLEWOOD

My Lords, arising out of the noble Lord's reply, which was very full but none the less very complicated, may I ask him whether he is aware that it is unique in the civilised world that profits on the sale of an invention for a lump sum are assessable both to income tax and to surtax? Is he aware, too, that this very week an American syndicate has been holding an exhibition in an hotel in London ostensibly to encourage British inventors to develop their inventions elsewhere than in Britain?

LORD BESWICK

My Lords, if that were done the amount payable to a recipient in this country would still be taxable; but I think the noble Lord is not correctly advised when he says that this is unique. My information is that receipts from the sale of patent rights are treated as taxable income in Germany, Sweden, Canada and Japan, and also in some circumstances in Australia and France, while in the United States they are treated as taxable capital gains. This is not unique, and if the noble Lord goes into this matter in detail he will see that the situation is not nearly so unfair to the inventor as some people may well believe.

LORD INGLEWOOD

My Lords, I ask the noble Lord to accept my apologies if, in fact, he finds that I have exaggerated, but I took my words from the Financial Times. Finally, may I ask him to make representations to the Chancellor of the Exchequer before the Budget to see whether he cannot do something for these inventors, because there is hardly any other way in which he can do more for this country at this moment than by helping the development of British brains.

LORD BESWICK

My Lords, concessions were made in the Finance Act of 1945 to the purchaser of patent rights, and it was a clear understanding at that time that those concessions made it possible to make a more generous payment to the inventor. There are two sides to this business which really ought to be considered together. If I may just make this one other point, since this is related to the hovercraft, I remember that it was stated in an article in the Observer of February 9, that according to the Managing Director of the N.R.D.C. not a penny piece has yet been made out of the hovercraft. So it may well be that the matter is not quite so unfair as some noble Lords may well think.