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

HMRC internal manual

International Manual

DT applications and claims - Types of income: Royalties

If you have a claim from the originator of the work (for example an individual) then you can normally assume that the claimant is the beneficial owner and you can allow relief. When you have a claim for copyright royalties if there is evidence to suggest that the claimant is not the originator of the work you need to check that the originator has assigned the rights to the claimant.

If the claimant does not satisfy the conditions for relief under the Double Taxation Agreement (DTA) or the royalties article of the DTA does not give full relief you should consider relief on Professional Author basis (see INTM342590).

You will sometimes find that the claimant is not the originator of the work and you will need to ask to see a copy of the Deed of Assignment - see below. This often happens where

  • The rights to book royalties may be willed to a beneficiary.
  • The rights to music and songs are assigned to a company. If several titles are claimed - a “catalogue of works” you should ask if there is a standard form of contract rather than asking for separate deeds of assignment.
  • Payments for plays and musicals may be owned by a company or by the estate of the original composer see INTM342550.
  • Royalty claims from an estate or trust.When the claimant is not the originator of the work you generally need to call for a copy of the document which shows that the originator assigned the rights to the claimant.

Deed of Assignment

In any case where you suspect that the claimant is not the originator of the work that is the subject of the claim you should ask to see the Deed of Assignment under the terms of which the claimant acquired the rights that are the subject of the claim or application. Our DT claim forms ask for this information to be provided. If an older version of a claim form is used you will need to write and ask for the information. You should bear in mind that an enquiry under the self assessment rules may be required.

When you receive the deed of assignment of the royalties you need to watch out for cases where the claimant company is merely acting as an Agent for another company or the individual creator of the work. You will have to refuse the claim and invite claims from the beneficial owners.

Special Relationship

Where the person in the UK who is paying the royalties is in some way connected to the recipient of the royalties - perhaps because one company owns the other or they have a common owner it is possible that the rate at which royalties are paid may not be at a commercial rate “arms length”. This is because there is a Special Relationship between the two parties to the contract.

Many double taxation agreements include provisions that deny or restrict relief where the amount of a royalty is influenced by a special relationship between the parties to the contract. In any case where you suspect that there may be a special relationship you should ask the Inspector of Taxes who is responsible for the UK payer of the royalties for a report on form 4450/2FD.