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HMRC internal manual

Business Income Manual

Authors and literary profits: gifts of literary works

The case of Mason v Innes [1967] 44TC326 shows that where an individual who carries on a profession:

  • produces a literary, artistic or other work in the exercise of that profession; and
  • before or after completion of the work, disposes of the rights in it, otherwise than in the course of the profession, by way of gift or for a consideration less than market value,

the market value of the gift, or the difference between the market value and the disposal price, as the case may be, cannot be treated as a receipt of the profession. The decision in Sharkey v Wernher [1955] 36TC275, which relates to trading stock disposed of otherwise than by way of trade (see BIM33630), and the provisions which gave statutory force to that decision, cannot be applied.

Any such disposition should, however, be considered for Capital Gains Tax liability.

A report should be made to CTISA (Technical) in any case where you are in doubt as to the application of the decision in Mason v Innes and, in particular, where:

  • the rights in the literary etc work are immediately sold by the recipient for a lump sum payment (and not, as in Mason v Innes, used as a source of income); or
  • avoidance is suspected; or
  • it is contended that there is no liability to Capital Gains Tax; or
  • any attempt is made to extend the application of the decision in Mason v Innes to the case of a trader.

See BIM35735 for information about the facts in Mason v Innes.