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HMRC internal manual

Trusts, Settlements and Estates Manual

Trust income: trustees receive mineral royalties

This guidance refers to mineral royalties received by trustees who are resident in the United Kingdom.


Mineral royalties treated as trade

S12 ITTOIA 2005 provides that the profits arising out of land used for mines and quarries (including gravel pits, sand pits and brickfields) are taxed as if the concern were a trade.  There is guidance on mineral royalties at BIM62001+.


Position before 6 April 2013 – Mineral Royalties relief (s201 TCGA1992)

For mineral royalties receivable prior to 6 April 2013 one half is excluded from income and instead treated as a chargeable gain (see CG71700+).  S122 ICTA 1988 applied the relief to ‘persons’ including trustees.

This relief was abolished in FA 2012.  There is guidance on the relief at BIM62090+.


Position from 6 April 2013

The whole of the mineral royalty that is receivable on or after 6 April 2013 is treated as income for tax purposes.


Mineral royalties and trustees

The position for trustees may be complicated by the operation of certain trust statute. 

Mineral royalties are generally income as they arise to the recipient, including trustees.  If the trustees have the power to accumulate income or pay it at discretion, the income is subject to the trust rate by virtue of S479 ITA 2007.  There are exceptions where statute - S47 Settled Land Act 1925 - alters the character of mineral royalties to partly capital in the hands of trustees if certain circumstances apply.  The effect of S47 is to convert the royalties to either one quarter or three quarters capital in the trustees’ hands.  If S47 Settled Land Act 1925 applies such that a part of the royalties are capital, then that part is subject only to basic rate tax.  Because it is already capital (by the action of statute) it cannot be ‘accumulated’ in the sense of S479 ITA 2007, and so is not subject to the trust rate.

Refer all queries on mineral royalties received by trustees to Trusts & Estates Technical Bootle.