Part 15Deduction of income tax at source
Chapter 6Deduction from annual payments and patent royalties
Duty to deduct from patent royalties
903Deduction from patent royalties
1
This section applies to any payment made in a tax year if—
a
it is a payment of a royalty or other sum in respect of the use of a patent, and
b
it meets the conditions in subsections (2) to (4).
2
The payment must not be—
a
a qualifying annual payment, or
b
an annual payment to which section 904 applies (annual payments for dividends or non-taxable consideration).
3
The payment must arise in the United Kingdom.
4
The payment must be one that is charged to income tax or corporation tax.
5
If the person who makes the payment is an individual—
a
the person must, on making the payment, deduct from it a sum representing income tax on it at the basic rate in force for the tax year, and
b
income tax equal to the sum required to be deducted is to be collected through the person's self-assessment return (see Chapter 17).
6
If the person who makes the payment is not an individual, and has some modified net income for the tax year (see section 1025)—
a
the person must, on making the payment, deduct from it a sum representing income tax on it at the basic rate in force for the tax year, and
b
income tax equal to the sum required to be deducted is to be collected through the person's self-assessment return (see Chapter 17).
7
If the person who makes the payment—
a
is not an individual, and
b
has no modified net income for the tax year,
the person by or through whom the payment is made must, on making it, deduct from it a sum representing income tax on it at the basic rate in force for the tax year.
8
See Chapter 8 which makes special provision in relation to royalties (double taxation arrangements: deduction at treaty rate and EU companies: discretion to pay gross).
9
For provision about the collection of income tax in respect of a payment from which a sum must be deducted under subsection (7)—
a
see Chapter 15 if the person making the payment is a UK resident company, and
b
otherwise see Chapter 16.