SCHEDULES

SCHEDULE 5Enterprise management incentives

Part 3Qualifying companies

Excluded activities: receipt of royalties or licence fees

19

1

This paragraph supplements paragraph 16(e) (receipt of royalties or licence fees).

2

If the requirement of sub-paragraph (3) is met, a trade is not to be regarded as consisting in the carrying of excluded activities within paragraph 16(e) as a result only of its consisting to a substantial extent in the receiving of royalties or licence fees.

3

The requirement of this sub-paragraph is that the royalties or licence fees (or all of them except for a part that is not substantial in terms of value) are attributable to the exploitation of relevant intangible assets.

4

For this purpose a “relevant intangible asset” is an intangible asset the whole or greater part of which (in terms of value) has been created—

F2a

by the relevant company, or

b

by a company which was a qualifying subsidiary of the relevant company throughout a period during which it created the whole or greater part (in terms of value) of the intangible asset.

5

In the case of an intangible asset which is intellectual property, any reference in sub-paragraph (4) to the creation of the asset by a company is to its creation in circumstances in which the right to exploit it vests in the company (either alone or jointly with others).

6

In sub-paragraph (5) “intellectual property” means—

a

any patent, trade mark, registered design, copyright, design right, performer’s right or plant breeder’s right; or

b

any rights under the law of a country or territory outside the United Kingdom which correspond or are similar to those falling within paragraph (a).

7

In this paragraph “intangible asset” means any asset which falls to be treated as an intangible asset in accordance with generally accepted accounting practice.

F18

If—

a

the relevant company acquired all the shares (“old shares”) in another company (“the old company”) at a time when the only shares issued in the relevant company were subscriber shares, and

b

the consideration for the old shares consisted wholly of the issue of shares in the relevant company,

references in sub-paragraph (4) to the relevant company include the old company.