Income Tax Act 2007

808 Meaning of “disposal of the licence” etc

(1) For the purposes of section 805 any reference to—

(a) a disposal of a licence acquired in carrying on a trade, or

(b) a disposal of a right to income under an agreement related to or containing a licence acquired in carrying on a trade (“a licence-related agreement”),

includes, in particular, any of events A to E.

(2) Event A is the revocation of the licence.

(3) Event B is the disposal, giving up or loss of—

(a) a right under the licence, or

(b) a right to income (or any part of any income) under a licence-related agreement,

by the individual or by a firm in which the individual is a partner.

It does not matter if the right is disposed of, given up or lost as part of a larger disposal, giving up or loss.

(4) Event C is the disposal, giving up or loss of the individual’s interest in a firm that has the licence or a right to income under a licence-related agreement (including the dissolution of the firm).

(5) Event D is a default in the payment of income to which—

(a) the individual, or

(b) a firm in which the individual is a partner,

has a right under a licence-related agreement.

(6) Event E is a change in the individual’s entitlement to any profits or losses relating to the licence the effect of which is that—

(a) the individual’s share of any profits is reduced (including to nil), or

(b) the individual becomes entitled to a share, or a greater share, of any losses without becoming entitled to a corresponding share of profits.

(7) The changes covered by event E include cases where there is an agreement under which the individual is entitled—

(a) to a particular share of any profits or losses relating to the licence in a period (including a nil share), and

(b) to a different share of any such profits or losses in a succeeding period (including a nil share).

(8) In such cases the change in the individual’s entitlement is treated for the purposes of section 805 as occurring at the beginning of the succeeding period.

(9) For the purposes of this section—

(a) references to any profits relating to the licence are to any profits deriving to any extent from income to which the individual has a right under a licence-related agreement, and

(b) references to any losses relating to the licence are to losses deriving to any extent from expenditure incurred in exploiting the licence.