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Unilateral relief (royalty income).
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46.— (1) The Principal Act is amended in Schedule 24—
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(a) in paragraph 4(5)(a) by substituting “paragraphs 9D and 9DB” for “paragraph 9D”,
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(b) in paragraph 4(5)(b)—
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(i) in subclause (iii) by deleting “and”, and
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(ii) in subclause (iv) by inserting “, and” after “that paragraph)”,
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(c) in paragraph 4(5)(b) by inserting the following after subclause (iv):
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“(v) the amount of income of a company treated for the purposes of paragraph 9DB as referable to an amount of relevant royalties (within the meaning of that paragraph),”,
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and
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(d) by inserting the following after paragraph 9DA:
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“Unilateral Relief (royalty income)
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9DB. (1) (a) In this paragraph—
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‘relevant foreign tax’, in relation to royalties receivable by a company, means tax—
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(i) which under the laws of any foreign territory has been deducted from the amount of the royalty,
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(ii) which corresponds to income tax or corporation tax,
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(iii) which has not been repaid to the company,
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(iv) for which credit is not allowable under arrangements, and
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(v) which, apart from this paragraph, is not treated under this Schedule as reducing the amount of income;
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‘relevant royalties’ means royalties receivable by a company—
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(i) which fall to be taken into account in computing the trading income of a trade carried on by the company, and
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(ii) from which relevant foreign tax is deducted;
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‘royalties’ means payments of any kind as consideration for—
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(i) the use of, or the right to use—
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(I) any copyright of literary, artistic or scientific work, including cinematograph films and software,
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(II) any patent, trade mark, design or model, plan, secret formula or process,
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or
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(ii) information concerning industrial, commercial or scientific experience.
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(b) For the purposes of this paragraph—
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(i) the amount of corporation tax which apart from this paragraph would be payable by a company for an accounting period and which is attributable to an amount of relevant royalties shall be an amount equal to 12.5 per cent of the amount by which the amount of the income of the company referable to the amount of the relevant royalties exceeds the relevant foreign tax, and
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(ii) the amount of any income of a company referable to an amount of relevant royalties in an accounting period shall, subject to paragraph 4(5), be taken to be such sum as bears to the total amount of the trading income of the company for the accounting period before deducting any relevant foreign tax the same proportion as the amount of relevant royalties in the accounting period bears to the total amount receivable by the company in the course of the trade in the accounting period.
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(2) Where, as respects an accounting period of a company, the trading income of a trade carried on by the company includes an amount of relevant royalties, the amount of corporation tax which, apart from this paragraph, would be payable by the company for the accounting period shall be reduced by so much of 87.5 per cent of any relevant foreign tax borne by the company in respect of relevant royalties in that period as does not exceed the corporation tax which would be so payable and which is attributable to the amount of the relevant royalties.
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(3) (a) This paragraph shall not apply as respects any accounting period of a company which is a relevant accounting period within the meaning of section 442.
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(b) Subsection (2) of section 442 shall apply for the purposes of this paragraph as it applies for the purposes of Part 14.”.
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(2) This section applies in respect of royalties received on or after 1 January 2010.
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