Chapter INTM620740
| Published date | 09 April 2016 |
| Record Number | INTM620740 |
The charge to tax on offshore receipts in respect of intangible property is calculated on the “UK-derived amounts” arising in the tax year. This is the intangible property (IP) income that the person receives or is entitled to receive that ultimately derives, directly or indirectly, from UK sales.
“UK-derived amounts” are:
- amounts arising in respect of the enjoyment or exercise of rights that comprise IP, and
- the enjoyment or exercise of those rights (or rights derived from those rights) enable, facilitate or promote UK sales (directly or indirectly)
UK-derived amounts will include both capital and revenue amounts where the recipient of the amount has an interest of any description in the IP, including where the amount is in respect of past or future enjoyment or exercise of IP rights, such as payments made in advance or in arrears. The inclusion of capital amounts, as well as revenue amounts, in the definition of UK-derived amounts is to ensure the robustness of the legislation.
UK-derived amounts will include amounts from the enjoyment or exercise of intangible property (or rights over intangible property). These amounts may arise in the form of an income stream or as part of the costs/sales proceeds of goods, services or other property, for example where there is an embedded royalty.
Example 1Fasterr is a global sports shoe brand headquartered in Spain. Fasterr PR, the group’s manufacturing and distribution principle based in Puerto Rico, is within the scope of Chapter 2A. UK sales are underpinned by the familiar brand and technology that purports to make the wearer run faster. There is intangible property within the definition at s608H which has facilitated, enabled or promoted UK sales. There are UK-derived amounts included in the return arising to Fasterr PR, and a charge under S608A will arise on the full UK-derived amount which relates to the sale of the trainers in the UK.
UK-derived amounts will relate to UK sales, but it does not matter whether the UK sales fall in the same tax year or a different one.
Examples of UK-derived amounts might include royalties; payments for the use of intellectual property (or other rights over intellectual property) such as registered and unregistered trademarks; distribution and manufacturing rights; other payments for the use of “know-how”; payments made under a franchise or licensing agreement; or payments relating to goodwill.
A UK-derived amount will...
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