Income Tax (Trading and Other Income) Act 2005

[F1 Charge to tax on offshore receipts in respect of intangible property U.K.

Textual Amendments

F1 Pt. 5 Ch. 2A inserted (with effect in accordance with Sch. 3 para. 7 of the amending Act) by Finance Act 2019 (c. 1), Sch. 3 para. 4 (with Sch. 3 para. 8)

608A Charge to tax on UK-derived amounts U.K.

(1) This section applies if—

(a) at any time in a tax year, a person is not UK resident and is not resident in a full treaty territory, and

(b) UK-derived amounts arise to the person in the tax year.

(2) Income tax is charged on the UK-derived amounts.

(3) See—

• sections 608D to 608H for the meaning of expressions used in this section;

• sections 608J to 608N for exemptions from the charge under this section.

(4) References in the Tax Acts to income from a source in the United Kingdom include UK-derived amounts.

608B Income charged under section 608A U.K.

Tax is charged under section 608A on the full amount of the UK-derived amounts arising in the tax year.

608C Person liable for tax under section 608A U.K.

The person liable for any tax charged under section 608A is the person receiving or entitled to the UK-derived amounts.

608D Meaning of residence U.K.

(1) This section applies for the purposes of this Chapter.

(2) A person is “resident” in a territory if, under the laws of the territory, the person is liable to tax there—

(a) by reason of the person's domicile, residence or place of management, but

(b) not in respect only of

[F2 (i)] income from sources in that territory or capital situated there [F3 , or]

[F4 (ii) such income and capital, and amounts remitted to or otherwise received in the territory.]

(3) Where—

(a) a person is resident in a territory outside the United Kingdom generally for the purposes of the laws of the territory or for particular purposes under those laws, and

(b) the laws of the territory have no provision for a person to be resident there for tax purposes,

the person is “resident” in the territory.

[F5 (4) Despite subsections (2) and (3), a person is treated as not resident in a full treaty territory if—

(a) the double taxation arrangements made in relation to the territory contain provision expressly excluding persons of a particular description from relief under the arrangements, and

(b) the person is of that description.

(5) In subsection (4) the reference to provision of the kind mentioned there does not include provision corresponding to the provision made by paragraphs 1 to 7 of article 29 of the OECD Model Tax Convention on Income and on Capital (entitlement to benefits), published on 21 November 2017.]

Textual Amendments

F2 S. 608D(2)(b)(i): words in s. 608D(2)(b) renumbered as s. 608D(2)(b)(i) (with effect in accordance with reg. 1(2) of the amending S.I.) by The Income Tax (Trading and Other Income) Act 2005 (Amendments to Chapter 2A of Part 5) Regulations 2019 (S.I. 2019/1452), regs. 1(1), 3(2)(a)

F3 Word in s. 608D(2)(b)(i) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Income Tax (Trading and Other Income) Act 2005 (Amendments to Chapter 2A of Part 5) Regulations 2019 (S.I. 2019/1452), regs. 1(1), 3(2)(b)

F4 S. 608D(2)(b)(ii) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Income Tax (Trading and Other Income) Act 2005 (Amendments to Chapter 2A of Part 5) Regulations 2019 (S.I. 2019/1452), regs. 1(1), 3(2)(c)

F5 S. 608D(4)(5) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Income Tax (Trading and Other Income) Act 2005 (Amendments to Chapter 2A of Part 5) Regulations 2019 (S.I. 2019/1452), regs. 1(1), 3(3)

608E Meaning of “full treaty territory” U.K.

(1) For the purposes of this Chapter a territory is a “full treaty territory” if—

(a) double taxation arrangements have been made in relation to the territory, and

(b) the arrangements contain a non-discrimination provision.

(2) In subsection (1) “non-discrimination provision”, in relation to double taxation arrangements, means a provision to the effect that nationals of a state which is a party to those arrangements (a “contracting state”) are not to be subject in the other contracting state to—

(a) any taxation, or

(b) any requirement connected with taxation,

which is other or more burdensome than the taxation and connected requirements to which nationals of that other contracting state in the same circumstances (in particular with respect to residence) are or may be subjected.

(3) In subsection (2) “national”, in relation to a contracting state, includes—

(a) an individual possessing the nationality or citizenship of the contracting state, and

(b) a legal person, partnership or association deriving its status as such from the laws in force in that contracting state.

608F Meaning of “UK-derived amount” and “UK sales” U.K.

(1) For the purposes of this Chapter an amount is a “UK-derived amount” if—

(a) it is an amount (whether of a revenue or capital nature) in respect of the enjoyment or exercise of rights that constitute any intangible property, and

(b) the enjoyment or exercise of those rights (or of any rights derived, directly or indirectly, from those rights) enables, facilitates or promotes UK sales (directly or indirectly).

(2) It does not matter whether the amount relates to UK sales in the tax year mentioned in section 608A or any other tax year.

(3) In this Chapter “UK sales” means any services, goods or other property—

(a) provided in the United Kingdom, or

(b) provided to persons in the United Kingdom.

[F6 (4) In subsection (3) the reference to anything being provided does not include it being provided for resale.

(5) For the purposes of subsection (4) a thing is provided “for resale” where it is provided to a person who obtains it for the purpose of providing it to another person in the following circumstances—

(a) there is no change in the thing itself, and

(b) if what is provided differs in any way from what was obtained, the difference is merely incidental to the provision of the thing.

(6) For the purposes of this Chapter a service consisting of the provision of online advertising constitutes a UK sale so far as the advertising is targeted at persons in the United Kingdom.]

Textual Amendments

F6 Ss. 608F(4)-(6) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Income Tax (Trading and Other Income) Act 2005 (Amendments to Chapter 2A of Part 5) Regulations 2019 (S.I. 2019/1452), regs. 1(1), 4

608G Section 608F: apportionment of amounts U.K.

(1) This section applies where—

(a) a person receives or is entitled to an amount in respect of the enjoyment or exercise of rights that constitute any intangible property, and that enjoyment or exercise enables, facilitates or promotes UK sales and other sales, or

(b) a person receives or is entitled to an amount in respect of—

(i) the enjoyment or exercise of rights that constitute any intangible property, where that enjoyment or exercise enables, facilitates or promotes UK sales, and

(ii) anything else.

(2) The amount is to be regarded for the purposes of this Chapter as constituting a UK-derived amount to such extent as is just and reasonable.

(3) In a case within subsection (1)(a) it is to be presumed, unless the contrary is shown, that the proportion of the amount that is just and reasonable is—

where X is the value of UK sales and Y is the value of other sales.

[F7 608GA. Section 608F: disregard for third party sales where intangible property makes insignificant contribution U.K.

(1) This section applies where—

(a) a person (A) receives or is entitled to a UK-derived amount,

(b) the services, goods or other property in question are not provided in the United Kingdom, or to persons there, by A or a person connected with A, and

(c) the UK sales in question are enabled, facilitated or promoted to an insignificant extent by the enjoyment or exercise of the rights in question.

(2) For the purposes of this Chapter no account is to be taken of A’s receipt of, or entitlement to, the UK-derived amount.

(3) For the purposes of subsection (1)(b), anything provided by a reseller (including anything treated as so provided by virtue of this subsection) is to be treated as provided by the person who provided it to the reseller.

(4) For this purpose “reseller” means a person to whom a thing is provided for resale (within the meaning of section 608F(5)).]

Textual Amendments

F7 S. 608GA inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Income Tax (Trading and Other Income) Act 2005 (Amendments to Chapter 2A of Part 5) Regulations 2019 (S.I. 2019/1452), regs. 1(1), 5

608H Meaning of “intangible property” U.K.

(1) In this Chapter “intangible property” means any property except—

(a) tangible property,

(b) an estate, interest or right in or over land,

(c) a right in respect of anything within paragraph (a) or (b),

(d) a financial asset,

(e) a share or other right in relation to the profits, governance or winding up of a company, or

(f) any property of a prescribed description.

(2) In this section—

• “financial asset” has the meaning given by section 806 of CTA 2009;

• “prescribed” means prescribed by regulations made by the Treasury.]

F8 608I Application of Chapter to certain partnerships U.K.

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Textual Amendments

F8 S. 608I omitted (with effect in accordance with reg. 1(2) of the amending S.I.) by virtue of The Income Tax (Trading and Other Income) Act 2005 (Amendments to Chapter 2A of Part 5) Regulations 2019 (S.I. 2019/1452), regs. 1(1), 6