Income Tax Act 2007

Chapter 7 U.K. Deduction from other payments connected with intellectual property

Certain royalties etc where usual place of abode of owner is abroad U.K.

906 Certain royalties etc where usual place of abode of owner is abroad U.K.

[F1 (1) This section applies to any payment made in a tax year where condition A or condition B is met.

(2) Condition A is that—

(a) the payment is a royalty, or a payment of any other kind, for the use of, or the right to use, intellectual property (see section 907),

(b) the usual place of abode of the owner of the intellectual property is outside the United Kingdom, and

(c) the payment is charged to income tax or corporation tax.

(3) Condition B is that—

(a) the payment is a payment of sums payable periodically in respect of intellectual property,

(b) the person entitled to those sums (“the assignor”) assigned the intellectual property to another person,

(c) the usual place of abode of the assignor is outside the United Kingdom, and

(d) the payment is charged to income tax or corporation tax.]

(4) But this section does not apply if the payment is made in respect of copies of works, or articles, which have been exported from the United Kingdom for distribution outside the United Kingdom.

(5) The person by or through whom the payment is made must, on making it, deduct from it a sum representing income tax on it at the basic rate in force for the tax year.

(6) See—

(a) Chapter 8 which makes special provision in relation to royalties (double taxation arrangements: deduction at treaty rate and EU companies: discretion to pay gross), and

(b) Chapter 11 (payments between companies etc) for an exception from the duty to deduct sums representing income tax under this section.

(7) For provision about the collection of income tax in respect of a payment from which a sum must be deducted under this section—

(a) see Chapter 15 if the person making the payment is a UK resident company, and

(b) otherwise see Chapter 16.

(8) If a payment to which this section applies is also one to which a provision of Chapter 6 applies, it is treated as not being a payment to which a provision of Chapter 6 applies.

Textual Amendments

F1 S. 906(1)-(3) substituted (with effect in accordance with s. 40(4) of the amending Act) by Finance Act 2016 (c. 24), s. 40(2) (with s. 40(5)-(8))

[F2 907 Meaning of “intellectual property” U.K.

(1) In section 906 “intellectual property” means—

(a) copyright of literary, artistic or scientific work,

(b) any patent, trade mark, design, model, plan, or secret formula or process,

(c) any information concerning industrial, commercial or scientific experience, or

(d) public lending right in respect of a book.

(2) In this section “copyright of literary, artistic or scientific work” does not include copyright in—

(a) a cinematographic film or video recording, or

(b) the sound-track of a cinematographic film or video recording, except so far as it is separately exploited.]

Textual Amendments

F2 S. 907 substituted (with effect in accordance with s. 40(4) of the amending Act) by Finance Act 2016 (c. 24), s. 40(3)

908 Royalty payments etc made through UK resident agents U.K.

(1) If—

(a) a payment to which section 906 applies is made through an agent who is UK resident, and

(b) the agent is entitled as against the owner of the right to deduct a sum as commission for services provided,

section 906(5) and Chapters 8 (deduction at special rates), 15 and 16 (collection) apply as if the amount of the payment were the amount net of the sum deductible as commission.

(2) But if the person by or through whom the payment is made does not know the commission is payable, or does not know its amount—

(a) the sum representing income tax required to be deducted under section 906 must be calculated in the first instance on the total amount of the payment, and

(b) the return to be made under Chapter 15 or the account of the payment under Chapter 16, must be based on that total amount.

909 Royalty payments: further provision U.K.

(1) A payment to which section 906 applies is treated for all income and corporation tax purposes as made when it is made by the first person who makes it, not when it is made by or through any other person.

(2) If, under section 906, a sum representing income tax must be deducted from a payment, any agreement to make the payment without deduction of that sum is void.

(3) Section 906—

(a) applies to payments on account of royalties as it applies to payments of royalties, and

(b) applies to payments on account of sums payable periodically as it applies to payments of sums payable periodically.

Proceeds of a sale of patent rights U.K.

910 Proceeds of a sale of patent rights: payments to non-UK residents U.K.

(1) This section applies if a non-UK resident sells the whole or part of any patent rights and is chargeable in respect of the sale—

(a) to income tax under section 587 of ITTOIA 2005, or

(b) to corporation tax under [F3 section 912 of CTA 2009].

(2) The person by or through whom the proceeds of the sale are paid must, on making any payment of—

(a) the proceeds, or

(b) an instalment of the proceeds,

deduct from it a sum representing income tax on the chargeable amount at the basic rate in force for the tax year in which the payment is made.

(3) In subsection (2) “the chargeable amount” means—

(a) so much of the proceeds or instalment as consists of a capital sum, less

(b) any incidental expenses of the sale which are deducted before payment.

(4) Sections 597 to 599 of ITTOIA 2005 (licences connected with patents etc) apply for the purposes of this section as they apply for the purposes of sections 587 to 596 of that Act.

(5) Section 4 of CAA 2001 (meaning of “capital sums” etc) applies in relation to this section as it applies in relation to that Act.

(6) For further provision about the sum required to be deducted, see—

(a) section 595 of ITTOIA 2005 (certain rules affecting the seller's income tax position do not affect the amount to be deducted), and

(b) [F4 section 919 of CTA 2009] (certain rules affecting the seller's corporation tax position do not affect the amount to be deducted).

(7) See Chapter 11 (payments between companies etc) for an exception from the duty to deduct sums representing income tax under this section.

(8) For provision about the collection of income tax in respect of a payment from which a sum must be deducted under this section—

(a) see Chapter 15 if the person making the payment is a UK resident company, and

(b) otherwise see Chapter 16.

Textual Amendments

F3 Words in s. 910(1)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 709(2) (with Sch. 2 Pts. 1, 2)

F4 Words in s. 910(6)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 709(3) (with Sch. 2 Pts. 1, 2)