Part 6Venture capital trusts

Chapter 4Qualifying holdings

Excluded activities

306Excluded activities: receipt of royalties and licence fees

1

This section supplements section 303(1)(e) (receipt of royalties and licence fees).

2

If the requirement of subsection (3) is met, a trade is not to be regarded as consisting in the carrying on of excluded activities within section 303(1)(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 subsection is that the royalties or licence fees (or all but for a part that is not a substantial part in terms of value) are attributable to the exploitation of relevant intangible assets.

4

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

a

by the company carrying on the trade, or

b

by a company which at all times during which it created the intangible asset was—

i

the holding company of the company carrying on the trade, or

ii

a company which, if that holding company were the relevant company, would be a qualifying subsidiary of that company.

5

In the case of an intangible asset that is intellectual property, references to the creation of an asset by a company are to its creation in circumstances in which the right to exploit it vests in the company (whether alone or jointly with others).

6

In this section—

  • “holding company” means a company that—

    1. a

      has one or more 51% subsidiaries, but

    2. b

      is not itself a 51% subsidiary of another company,

  • “intangible asset” means any asset which falls to be treated as an intangible asset in accordance with generally accepted accountancy practice, and

  • “intellectual property” means—

    1. a

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

    2. 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).