Income Tax (Trading and Other Income) Act 2005

Chapter 8 Rent receivable in connection with a UK section 12(4) concern

Charge to tax on rent receivable in connection with a UK section 12(4) concern

335 Charge to tax on rent receivable in connection with a UK section 12(4) concern

Income tax is charged on rent receivable in connection with a UK section 12(4) concern.

336 Meaning of “rent receivable in connection with a UK section 12(4) concern”

(1) For the purposes of this Chapter rent is receivable in connection with a UK section 12(4) concern if—

(a) it is receivable in respect of an estate, interest or right in or over land in the United Kingdom, and

(b) the estate, interest or right is used, occupied or enjoyed in connection with a concern listed in section 12(4).

(2) For the purposes of this Chapter rent is also receivable in connection with a UK section 12(4) concern if—

(a) it is receivable in respect of an estate, interest or right in or over land in the United Kingdom,

(b) the lease or other agreement under which it is receivable provides for its recoupment by reducing royalties or payments of a similar nature, and

(c) the reduction applies if the estate, interest or right is used, occupied or enjoyed in connection with a concern listed in section 12(4).

(3) In this Chapter “rent” includes—

(a) a receipt mentioned in section 266(3), and

(b) any other receipt in the nature of rent.

337 Income charged

(1) Tax is charged under this Chapter on the full amount of the profits arising in the tax year.

(2) This is subject to—

• section 339 (deduction for management expenses of owner of mineral rights), and

• section 340 (relief in respect of mineral royalties).

338 Person liable

The person liable for any tax charged under this Chapter is the person receiving or entitled to the rent.

Management expenses of owner of mineral rights

339 Deduction for management expenses of owner of mineral rights

(1) This section applies if in a tax year—

(a) a person lets a right to work minerals in the United Kingdom, and

(b) the person pays a sum wholly and exclusively as an expense of management or supervision of the minerals in the tax year.

(2) In calculating the amount of rent receivable in connection with a UK section 12(4) concern, a deduction is allowed for the sum for the tax year.

(3) This is subject to section 340 (relief in respect of mineral royalties).

Mineral royalties

340 Relief in respect of mineral royalties

(1) This section applies if in a tax year—

(a) a person who is UK resident, or ordinarily UK resident, is entitled to receive mineral royalties under a mineral lease or agreement, and

(b) the royalties are chargeable to tax under this Chapter.

(2) In calculating the amount of the royalties so chargeable, the person is treated as—

(a) entitled to receive only half of the total of the royalties arising under the lease or agreement in the tax year, and

(b) paying in the tax year only half of the total of the expenses mentioned in section 339(1)(b) (deduction for management expenses of owner of mineral rights).

(3) As to the meaning of “mineral lease or agreement” and “mineral royalties”, see sections 341 to 343.

341 Meaning of “mineral lease or agreement” and “mineral royalties”

(1) In this Chapter “mineral lease or agreement” means—

(a) a lease, profit à prendre, licence or other agreement conferring a right to win and work minerals in the United Kingdom,

(b) a contract for the sale, or a conveyance, of minerals in or under land in the United Kingdom, and

(c) a grant of a right under section 1 of the Mines (Working Facilities and Support) Act 1966 (c. 4) other than an ancillary right (within the meaning of that Act).

(2) In this Chapter “mineral royalties” means so much of any rent receivable under a mineral lease or agreement as relates to the winning and working of minerals.

(3) For the purposes of this section and section 343 “minerals” means all minerals and substances in or under land which are ordinarily worked for removal—

(a) by underground working, or

(b) by surface working,

but excluding water, peat, top-soil and vegetation.

342 Extended meaning of “mineral royalties” etc. in Northern Ireland

(1) In the application of this Chapter to Northern Ireland references to mineral royalties include the following periodical payments.

(2) The payments are—

(a) payments of compensation under section 29 or 35 of the Mineral Development Act (Northern Ireland) 1969 (c. 35 (N.I.)) (“the 1969 Act”),

(b) payments of compensation under section 4 of the Petroleum (Production) Act (Northern Ireland) 1964 (c. 28 (N.I.)) (“the 1964 Act”),

(c) payments made as mentioned in section 37 of the 1969 Act,

(d) payments made under section 55(4)(b) of the 1969 Act, and

(e) payments made under section 11 of the 1964 Act (payments in respect of minerals to persons entitled to a share of royalties under section 13(3) of the Irish Land Act 1903 (c. 37)).

(3) In the application of this Chapter to Northern Ireland references to the mineral lease or agreement under which mineral royalties are receivable include the enactment under which those payments are made.

343 Power of Board to determine what counts as “mineral royalties”

The Board of Inland Revenue may by regulations—

(a) provide whether, and to what extent, rents receivable under a mineral lease or agreement which relate both to the winning and working of minerals and to other matters are treated as mineral royalties, and

(b) provide for treating the whole of such rents as mineral royalties if the extent to which they relate to matters other than the winning and working of minerals is small.