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HMRC internal manual

Business Income Manual

Miscellaneous income: particular sources: newspaper stories

S687-S689 Income Tax (Trading and Other Income) Act 2005, S979-S981 Corporation Tax Act 2009

Fees received for providing information to a newspaper are assessable as miscellaneous income under the sweep-up provisions if not otherwise taxable.

In Hobbs v Hussey [1942] 24TC153 it was held that a solicitor’s clerk, who had never carried on the profession of an author, was chargeable in respect of a payment received from a newspaper for the serial rights of his life story. It was contended for the taxpayer that the transaction was a sale of the copyright of the series of articles and, therefore, resulted in a sale of capital and not a revenue receipt. At page 156, Lawrence J held that the fact that a service involved an element of the sale of a capital asset did not prevent it being a service.

‘… it is also true, in my opinion, that the performance of services, though they may involve some subsidiary sale of property (e.g., dentures sold by a dentist), are in their essence of a revenue nature, since they are the fruit of the individual’s capacity which may be regarded in a sense as his capital but are not the capital itself.’

The question then was: what is the nature of the transaction?

‘Does then the fact that the present transaction involved the sale of the copyright in the Appellant’s series of articles, constitute therefrom capital; or is the sale merely subsidiary to what was in its essence a performance of services by the Appellant? In my opinion, the true nature of the transaction was the performance of services. The Appellant did not part with his notes or diaries or his reminiscences.’

As Hobbs was being paid for his services, he was taxable under the miscellaneous income sweep-up provisions.

The case of Housden (Inspector of Taxes) v Marshall [1958] 38TC233 differed in that Marshall, a famous jockey, did not write the articles. He agreed to make available, to a newspaper, reminiscences of his racing career together with certain documents relating to it. The agreement granted the newspaper the first British serial rights in the reminiscences and gave the right to publish the article under the taxpayer’s name and to use a facsimile of his signature. In return, the taxpayer was to receive two payments of £750.

Subsequently, a journalist employed by the newspaper wrote four articles about the taxpayer. These articles were written as a result of the journalist’s own researches and the taxpayer’s only contribution was to suggest certain minor amendments. Because of a national newspaper strike only one article was published and the taxpayer received only one of the two proposed £750 payments.

The taxpayer appealed against an assessment under the miscellaneous income provisions in respect of the £750 payment. The Special Commissioners held that the agreement provided predominantly for a sale of publication rights, any services rendered being incidental and subsidiary, and that the £750 was therefore not assessable.

Harman J held that the Special Commissioners had misunderstood the agreement with the newspaper:

‘I do not think that he sold any publication rights in his reminiscences. He had no reminiscences of which he could sell the rights. The reminiscences which he communicated to the journalist, if they had been used - which in the upshot they were not - were as I say not his; he had no secrets to impart, his life was open. He was not selling anything of which he had the property like the copyright. He was not selling anything secret. He was merely talking to the journalist and allowing the journalist’s write-up to be put forward as his.’

As a result he reversed their decision holding that the £750 was assessable under the miscellaneous income sweep-up provisions as a payment for services.

This case shows the importance of understanding exactly in relation to what is money being paid. It is not simply a case of reading the agreement; it is important to see what was actually done as a result.

Giving a judgment in the High Court of Australia in the case of Brent v Federal Commissioner of Taxation [1971] 71ATC4195, Gibbs J said that:

‘I have not been referred to any case in which it has been held that information which was not acquired or used in connection with a business should be treated as a capital asset whose disposal would result in the receipt of a capital gain rather than of income.’

He distinguished information from copyright saying that:

‘In Trustees of Earl Haig v. I.R. Commrs. (1939) 22 T.C. 725, the trustees who had the right to publish the war diaries of Earl Haig gave to an author the right to make full use of the diaries so far as the public interest permitted and the sum received by the trustees as consideration for so doing was held to be a capital payment and not assessable to income tax. However, in that case, the trustees had the copyright in the diaries, which was indubitably property, and they did not merely sell information to the author, but in effect partially realised their copyright.’