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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Intellectual Property Rights: image rights: CGT implications: what else if not CGT

Capital Gains Tax (CGT) and “image rights”

For the purposes of CGT “all forms of property” are assets, including incorporeal property (e.g. intangible assets) but property must be capable of being owned (CG11700) and with a value that can be realised (CG12010).   As “image rights” do not exist in UK law, an individual cannot defend those rights to realise value from them in an UK court.   It follows that “image rights”, in themselves, cannot represent an asset that can be transferred in the UK for the purposes of CGT.  

Some individuals and their agents have relied on the Sports Club decision to argue that an individual can own “image rights” which can be then transferred to what is often described as an “image rights” company.   For the reasons set out above, HMRC does not accept this analysis.  There can be no transfer for CGT purposes of “image rights” per se.

It is possible for an “image rights” company to own an asset (e.g. a contractual right to exploit a player’s image) but this will often be a right that was newly created in the company, not an asset owned previously by the player (exceptions to this are considered below).  There may be a value to that contractual right if the company disposes of it to a third party, but there is no value at the earlier date when the player grants the right to the company.

Sports Club is an example of this. The players’ companies had the contractual right to require them to endorse products. The Special Commissioners held that this was a genuine right which reflected commercial reality and, accordingly, it had significant value for the companies concerned. However, this right did not exist before the players entered into their agreements with the companies; it was created as a result of those agreements.  As a result, it would be wrong to say that the players transferred the rights to the company.

What else can “image rights” represent?

The concept of an “image right” is therefore, to the extent that it can be protected under UK law, and dependent on the facts of the case, likely to be a bundle of different IPRs and goodwill (CG68405).   These may include, for example, contractual rights (CG13000) as in Sports Club, registered trade-marks (CG68220), copyright (CG68250) or goodwill (CG68410).

In other words what are loosely referred to as “image rights” can be protected under UK law only to the extent that they are not “image rights” at all, but a different form of identifiable asset, such as contractual rights to provide services under a promotional agreement, as in Sports Club.   If there is no identifiable asset, the “image rights” may represent goodwill (CG68010).

It is not unusual for a sportsperson or entertainer to develop a business to exploit their image – e.g. for endorsements or personal appearances.  If there is a real business of this type, it could in principle have some goodwill.  If the business is transferred as a going concern to a company it is possible that there could be a disposal of the goodwill as well.

However, it is likely that questions may arise concerning the nature of the goodwill (personal or business), whether that goodwill is capable of transfer, and if so whether the business has been genuinely transferred from the individual to a corporate successor.  Goodwill is covered in detail at CG68010.