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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Mineral royalties

TCGA92/S201 (1)

The guidance at CG71702-CG71720 applies where mineral royalties are received in respect of minerals which are situated in the United Kingdom before 1 April 2013 (for businesses subject to Corporation Tax) and 6 April 2013 (for businesses subject to Income Tax).

The relief has been withdrawn for mineral royalties receivable on or after those dates by FA 2012/Sch 39/Para 43.

Prior to 1 May 1995 such mineral royalties were paid under deduction of basic rate Income Tax.

Where mineral royalties are received under a mineral lease or agreement, those royalties are to be treated as half-income and half-capital receipts by virtue of TCGA92/S201 (1).

Guidance for dealing with the half treated as income is at BIM62090 onwards.

Guidance for dealing with the half treated as capital is at CG71702-CG71720.

Definitions

ICTA88/S122 (5) & (6)

The terms `minerals’, `mineral royalties’ and `mineral lease or agreement’ are defined in full in ICTA88/S122 (5) and (6). Brief definitions of these terms, for the purposes of Section 122, are as follows.

  • ‘minerals’ means all substances in or under the land which are normally extracted by underground or surface working, but excluding water, peat, top-soil and vegetation.
  • ‘mineral royalties’ means royalties receivable on or after 6 April 1970 under a mineral lease or other agreement relating to the winning and working of minerals.
  • ‘mineral lease or agreement’ means any lease or similar agreement granting the right to win and work minerals in the United Kingdom.

For the purposes of these definitions, `winning’ means getting access to the minerals and `working’ means getting them out of the ground. The above definitions apply for CGT purposes by virtue of TCGA92/S203 (1).