INTM630220 - Royalty Withholding: Anti Treaty Shopping Rules: Intellectual property royalty payment

ITA07/S917A(4) defines an intellectual property royalty payment as a payment defined in S906(2)(a) or (3)(a). The definitions in S906(2)(a) and (3)(a) were introduced by FA16 – see INTM630310. In turn, these rely on ITA07/S907.

S917A applies to such payments made on or after 28 June 2016.

Payments made on or after 17 March 2016 and before 28 June 2016

For payments made on or after 17 March 2016 but before 28 June 2016, the definition of intellectual property royalty payments is provided by FA16/S41(3). Payments within scope of S917A during this period are:

  • royalties, or other sums, in respect of the use of a patent,
  • a payment within S906(1)(a) as originally enacted,
  • a ‘qualifying annual payment’ as defined by S899(3)(a)(ii).

ITA07/S906(1)(a)

ITA07/S906(1)(a), as originally enacted, includes payments in respect of a relevant intellectual property right as defined by S907. An intellectual property right includes:

  • a copyright (not including copyright in a cinematographic film or video recording or its soundtrack, except so far as it is separately exploited),
  • a right in design (the design right in a design or the right in a registered design), or
  • the public lending right in respect of a book.

Qualifying Annual Payment – ITA07/S899(3)(a)(ii)]

A qualifying annual payment under ITA07/S899(3)(a)(ii) is an annual payment of the type defined in ITTOIA05/S579. These include a:

  • patent,
  • trade mark,
  • registered design,
  • copyright,
  • design right,
  • performer’s right,
  • plant breeder’s right.

This also includes rights under the law of the UK or any other jurisdiction which are similar to those outlined above are included within this definition, as are any idea, information or technique not protected by such a right.

Guidance on annual payments can be found at SAIM8000.

Meaning of intellectual property: commencement

The anti-avoidance rule in S917A applies to payments meeting the definition provided by ITA07/S907 at the time the payment is made. Payments made before 28 June 2016 will be in scope of S917A if made for use of, or the right to use, a ‘relevant intellectual property right’ as defined in S907 before FA16. Payments made on or after 28 June 2016 will be in scope of S917A if made for use, or the right to use, ‘intellectual property’ as defined in S907 following FA16 (see INTM630310).

The practical effect is that S917A does not apply to royalty payments that are not annual payments in respect of a trademark or brand name made on or after 17 March 2016 and before 28 June 2016.

Anti-forestalling

Any arrangements with a main purpose of avoiding the effect of FA16/S40 (and the extended scope of the duty to deduct income tax at source) are ignored by virtue of FA16/S40(5).