Income Tax (Trading and Other Income) Act 2005 (c. 5)

Part 5 U.K. Miscellaneous income

Chapter 2 U.K. Receipts from intellectual property

Charge to tax on non-trading income from intellectual property U.K.

579 Charge to tax on royalties and other income from intellectual property U.K.

(1) Income tax is charged on royalties and other income from intellectual property.

(2) In this section “intellectual property” means—

(a) any patent, trade mark, registered design, copyright, design right, performer's right or plant breeder's right,

(b) any rights under the law of any part of the United Kingdom which are similar to rights within paragraph (a),

(c) any rights under the law of any territory outside the United Kingdom which correspond or are similar to rights within paragraph (a), and

(d) any idea, information or technique not protected by a right within paragraph (a), (b) or (c).

580 Income charged under section 579 U.K.

(1) Tax is charged under section 579 on the full amount of the income arising in the tax year.

(2) Subsection (1) is subject to Part 8 (foreign income: special rules).

(3) See section 582 for provision about the calculation of the amount of income charged under section 579.

(4) This section needs to be read with section 527 of ICTA (spreading of patent royalties etc. over several years).

581 Person liable for tax under section 579 U.K.

The person liable for any tax charged under section 579 is the person receiving or entitled to the income.

582 Deductions in calculating certain income charged under section 579 U.K.

(1) This section applies for calculating the amount of income charged under section 579 other than annual payments.

(2) Expenses wholly and exclusively incurred for the purpose of generating the income are deductible.

(3) If an expense is incurred for more than one purpose, a deduction may be made for any identifiable part or identifiable proportion of the expense which is incurred wholly and exclusively for the purpose of generating the income.

(4) Expenses which would not have been allowable as a deduction in calculating the profits of a trade, if they had been incurred for its purposes, are not deductible under this section.

(5) Expenses for which any kind of relief is given under any other provision of the Income Tax Acts are not deductible under this section.

(6) The relief given under section 600 (relief for expenses: patent income) is additional to the relief under this section.

(7) The frequency with which payments are made is ignored in determining whether they are annual payments for the purposes of subsection (1).