Income Tax Act 2007

Chapter 8 U.K. Chapters 6 and 7: special provision in relation to royalties

Deduction at special rates U.K.

911 Double taxation arrangements: deduction at treaty rate U.K.

(1) This section applies if—

(a) a company pays a royalty from which it is required to deduct a sum representing income tax under Chapter 6 or 7,

(b) the income tax in respect of the payment is collectible under Chapter 15 or 16, and

(c) the company reasonably believes that, at the time the payment is made, the payee is entitled to relief in respect of the payment under double taxation arrangements.

(2) The company may calculate the sum to be deducted from the payment under Chapter 6 or 7 by reference to the treaty rate.

(3) But, if the payee is not at the time entitled to such relief, this Part has effect as if subsection (2) had never applied in relation to the payment.

(4) In this section “the treaty rate” means the rate of income tax appropriate to the payee under the arrangements.

912 Power to make directions disapplying section 911 U.K.

(1) This section applies if an officer of Revenue and Customs is not satisfied that the payee will be entitled to relief under double taxation arrangements in respect of one or more payments of royalties that a company is to make.

(2) The officer may direct the company that section 911 is not to apply to the payment or payments.

(3) A direction under subsection (2) may be varied or revoked by a later direction.

913 Interpretation of sections 911 and 912 U.K.

(1) In sections 911 and 912 “royalty” includes—

(a) a payment received as consideration for the use of, or the right to use, a copyright, patent, trade mark, design, process or information, and

(b) the proceeds of the sale of the whole or part of any patent rights.

(2) In sections 911 and 912 “payee” means the person beneficially entitled to the income in respect of which the payment is made.

F1 ... U.K.

Textual Amendments

F1 Ss. 914-917 and cross-heading repealed (with effect in accordance with s. 34(8) of the amending Act) by Finance Act 2021 (c. 26), s. 34(1)(b)

F1 914 European Union U.K.

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F1 915 Power to make directions disapplying section 914 U.K.

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F1 916 Duty of payee to notify if payment not exempt U.K.

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F1 917 Supplementary U.K.

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[F2 Tax avoidance U.K.

Textual Amendments

F2 S. 917A and cross-heading inserted (with effect in accordance with s. 41(2) of the amending Act) by Finance Act 2016 (c. 24), s. 41(1) (with s. 41(3)(4))

917A Tax avoidance arrangements U.K.

(1) This section applies if and to the extent that—

(a) a person (“the payer”) makes an intellectual property royalty payment,

(b) the payment is received by a person (“the payee”) who is connected with the payer, and

(c) the payment is made under DTA tax avoidance arrangements.

(2) Any duty under Chapter 6 or 7 to deduct a sum representing income tax at any rate applies without regard to any double taxation arrangements.

(3) Any income tax deducted by virtue of subsection (2) may not be set off under section 967 or 968 of CTA 2010.

(4) In this section—

• “arrangements” (except in the phrase “double taxation arrangements”) includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable;

• “DTA tax avoidance arrangements” means arrangements where, having regard to all the circumstances, it is reasonable to conclude that—

  (a)

  the main purpose, or one of the main purposes, of the arrangements was to obtain a tax advantage by virtue of any provisions of a double taxation arrangement, and

  (b)

  obtaining that tax advantage is contrary to the object and purpose of those provisions;

• “intellectual property royalty payment” means a payment referred to in section 906(2)(a) or (3)(a);

• “receive” means receive—

  (a)

  directly or indirectly;

  (b)

  by one payment or by a series of payments;

• “tax advantage” is to be construed in accordance with section 208 of FA 2013.

(5) For the purposes of this section the payer is connected with the payee if the participation condition is met as between them.

(6) Section 148 of TIOPA 2010 (when the participation condition is met) applies for the purposes of subsection (5) as for the purposes of section 147(1)(b) of that Act, but as if references to the actual provision were to the provision made or imposed between the payer and the payee in respect of the arrangements under which the payment is made.]