Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

HM Revenue & Customs
, see all updates

Enterprise Management Incentives (EMI): Excluded activities: Receipt of royalties or licence fees

Receiving royalties or licence fees is an excluded trade, but that exclusion is waived in certain circumstances as shown below.

The waiver applies where the royalties or licence fees are attributable to the exploitation of certain assets described as ‘relevant intangible assets’. Where some of the royalties or licence fees are attributable to this and some are not, the latter can be ignored if they do not amount to a substantial part of the total in terms of their value.

An ‘intangible asset’ for this purpose is anything that could be treated as such under normal UK accounting practice, which is set out in Financial Reporting Standards 12. This covers all intellectual property as defined in the legislation, and also industrial information and techniques.

The definition of ‘relevant intangible asset’ was widened with effect from 6 April 2007. It is now defined as an asset created by the company issuing the EMI options, or by a company that was a qualifying subsidiary of the company issuing EMI options for the whole of the period during which it created the asset. Prior to 6 April 2007, the legislation was more restrictive, with the unintended consequence that when a company transferred assets to a subsidiary, this could have been a disqualifying event (see ETASSUM57050). From 6 April 2007, assets can be transferred to a subsidiary which was not in the group at the time the assets were created without qualifying status being lost as a result, (Paragraph 19).