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HMRC internal manual

International Manual

From
HM Revenue & Customs
Updated
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DT applications and claims - Types of income: Royalties

UK income tax is deducted from copyright royalties under ICTA88/S536. These provisionsare subject to the following considerations

  • the type of payment. There may be no doubt that the payment is a royalty but it could be outside the scope of S536 - for example, if payable to a professional author see INTM342590. Whether or not a payment falls within the scope of S536 is for the UK Inspector who is responsible for the payer of the income to decide.
  • where the recipient of the royalties lives. Royalty payments fall under S536 if the copyright owner has his usual place of abode outside the UK. S536 does not use the words “not resident in the UK” so even though tax is deducted/deductible you cannot make the assumption that the claimant is not resident in the UK. Whether the recipient of a royalty has a “usual place of abode” outside the UK for the purposes of S536 is a question for the Inspector of Taxes for the payer of the royalties to decide. See IM4005.
  • the source of the income. If the copyright is exploited in the UK the royalty payment will be regarded as having a UK source and therefore within the provisions of S536. This is irrespective of the law governing the contract.

NOTE: you must not give a ruling on any of the above three points. Responsibility fordeciding if any payment is within the charge to tax lies with the Inspector of Taxes whois responsible for the Corporation Tax affairs of the UK payer of the royalties.

If you have a case where there is something which prevents you from giving relief underthe Double Taxation Agreement (DTA) you should submit the file to Technical Advice Group.