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HMRC internal manual

Capital Gains Manual

Intellectual Property Rights: image rights: asset identification and valuation

Identification of the asset

The starting point for “image rights” enquiries is often a request to Shares and Assets Valuation (SAV) to check a valuation placed on the disposal of “image rights”, either as a post-transaction valuation check, as part of pre-enquiry risk assessment or during an enquiry. This is unlikely to be the correct place to start.

The correct starting point should be to establish the nature of the asset concerned, if any. Only once an asset that is not image rights has been identified, can SAV consider a valuation.

Valuation of goodwill

Where the asset disposed of is goodwill, the valuation is often significantly lower than suggested by the taxpayer or agent. There are two broad reasons for this -

(i) in many instances, most or all of the goodwill is personal to the individual and is not capable of transfer CG68010;

(ii) any valuation of a business based on exploiting an image is likely to recognise that in order to conduct the business previously carried out solely by the celebrity, the transferee must acquire the services of the celebrity, which might be expected to cost an amount equivalent to most, if not all, of the transferee’s income.

Example - contractual rights

Celebrities may have contractual rights, for example to make TV or radio programmes, or to write regular newspaper columns. Sportsmen may have contracts to endorse particular manufacturer’s clothing or equipment.

Contractual rights may be assets for CGT purposes CG12040, but you must consider whether there is any significant value in the rights, if the contract requires the celebrity to carry out stipulated obligations. For example, if a celebrity is contracted to write a weekly column for a national newspaper, if the celebrity transfers that contract to an image rights company (IRC), the net value to the IRC of the right to income from that contract might be greatly reduced (perhaps to nothing) by the value to be placed on the cost to the IRC of obtaining the services of the celebrity to write the column.

Advice from Shares and Assets Valuation

Advice on all issues relating to the valuation of Intellectual Property Rights including goodwill should be submitted to Shares & Assets Valuation.