Jeffrey v. Rolls - Royce, Ltd. (1961), 40 TC 443 (HL)

In finding that sums received by the taxpayer for providing technical know-how to foreign organizations were receipts of its trade of manufacturing automobiles and airplane engines, Lord Radcliffe stated (at p. 495) that "I think that the Crown were right in saying that the Company's new way of exploiting 'know-how' was no more than a development of its direct manufacturing trade and did not rank, or need to rank, as a separate business".

The taxpayer, which was a manufacturer of automobiles and airplane engines, received various sums pursuant to purported licences of know-how to foreign organizations. Generally, it supplied a large number of drawings and other information, and undertook to teach technicians from those countries and to send some of its own employees to supervise operations there.

In finding that the sums were receipts of the taxpayer's trade, Lord Reid noted (at p. 492) that "in essence, what it did was to teach the 'licensees' how to make use of the 'licences' which it granted and that this course of 'granting of licences' was merely an extension of its existing trade devised to meet the difficulty that it could not sell its engines in the countries of the 'licensees'. It was merely another method of deriving profit from the use of this technical knowledge, experience and ability,"