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HMRC internal manual

Capital Gains Manual

Mineral royalties: treatment of royalties as chargeable gains

TCGA92/S201 (1) & (3)

Under TCGA92/S201 (1), half of the gross mineral royalties are treated as a chargeable gain.

No deductions whatsoever can be made from the one half of the royalty treated as capital.

Mixed receipts


If the royalty received relates both to the winning and working of minerals and to other matters, The Mineral Royalties (Tax) Regulations 1971 (SI971/1035) provide for an apportionment to be made.

The apportionment is between:

i) The amount which it could be expected would have been paid if the agreement had only related to the winning and working of minerals, and

ii) The amount which it could be expected would have been paid for the other matters.

Only the amount apportioned to category (i) above is a `mineral royalty’ for the purposes of ICTA88/S122 and TCGA92/S201.

However, if at least 90 per cent of the payment would be apportioned to category (i) above as a mineral royalty, no apportionment is required and all the receipt is treated as a mineral royalty.

In practice, if an apportionment suggested by the taxpayer or agent appears reasonable in the light of the agreement and the known facts, that apportionment should be accepted.

Otherwise, and in particular if it is suspected that any avoidance of tax is being attempted by the use of `mixed’ payments, a written report should be made to CTISA (CT & BIT (Trading & Property Income)).