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HMRC internal manual

International Manual

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

Computer software

Where software is purchased a licence entitling the purchaser to use the software and giving him a limited right to copy it to facilitate its use often accompanies it. In these circumstances we do not usually argue that any part of the payment for the software is a payment to which S536 applies. It is only where, exceptionally, the purchaser has acquired a right of reproduction in order to make several copies as a way of exploiting the software that S536 applies.

You should ask for a report on form 4450/2FD from the tax office that is responsible for the Corporation Tax affairs of the UK company. This form contains a question about whether tax is deductible from the royalties. If the Inspector confirms that tax is deductible then, subject to normal examination of the treaty application, double taxation relief may be allowed.