Annex 1: Minor changes in the law made by the Act: Change 51: Disposal of know-how: restore an express definition of mineral deposits: sections 192 and 583
This change restores (for income tax purposes) a previous definition of “mineral deposits”.
The definition of “mineral deposits” in these sections is in substance the definition that applied for the purposes of the definition of “know-how” in the source legislation for sections 192 and 583 of this Act. That definition applied before certain amendments of Chapter 1 of Part 13 of ICTA were made by CAA.
Section 531 of ICTA makes provision about the tax treatment of certain disposals of know-how. Different provision is made about disposals of know-how that has been used in the course of a trade and other disposals of know-how. The former provision is rewritten in sections 193 and 194 of this Act and the latter in sections 583 to 586.
Know-how is defined for the purposes of section 531 of ICTA as:
“any industrial information and techniques likely to assist in the manufacture or processing of goods or materials, or in the working of a mine, oil-well or other source of mineral deposits (including the searching for, discovery or testing of deposits or the winning of access thereto), or in the carrying out of any agricultural, forestry or fishing operations.”
Before certain amendments of ICTA were made by CAA, the following definition applied to the expression “mineral deposits” in that definition:
““mineral deposits” includes any natural deposits capable of being lifted or extracted from the earth and, for this purpose, geothermal energy, whether in the form or aquifers, hot dry rocks or otherwise, shall be treated as a natural deposit.”
The history of that definition is as follows. The provisions of section 531 of ICTA derive from section 21 of FA 1968, which included the following definition:
“(7)In this section “know-how” means any industrial information and techniques likely to assist in the manufacture or processing of goods or materials, or in the working of a mine, oil-well or other source of mineral deposits (including the searching for, discovery, or testing of deposits or the winning of access thereto), or in the carrying out of any agricultural, forestry or fishing operations.”
Subsection (9) of that section required the above definition to be construed as if it were contained in Part 1 of the Capital Allowances Act 1968, so that the following definition of “mineral deposits” applied:
““mineral deposits” includes any natural deposits capable of being lifted or extracted from the earth.”
That definition was amended by paragraph 2(3) of Schedule 13 to FA 1968, which added the words from “and, for this purpose” onwards.
The relevant provisions were consolidated in 1970 and again in 1988. Section 532 of ICTA originally provided for the definition of “know-how” to be construed as if it were contained in Part 1 of the Capital Allowances Act 1968. A reference to “the 1990 Act” was substituted by the Capital Allowances Act 1990. This attracted the definition of “mineral deposits” which is set out above in the fourth paragraph of this note, and applied throughout that Act.
CAA rewrote provisions about know-how allowances that were previously in Chapter 1 of Part 13 of ICTA. In consequence of the repeal of the Capital Allowances Act 1990, CAA also amended section 532 of ICTA so that it provides for the definition of “know-how” to be construed as if it were contained in the 2001 Act. However, no definition of “mineral deposits” applies for the purposes of CAA as a whole. So the consequential amendment failed to preserve the application of the Capital Allowances Act 1990 definition of “mineral deposits” to the remaining provisions of Chapter 1 of Part 13 of ICTA (including those on which sections 192 and 583 are based).
It is noteworthy that a version of the definition of “mineral deposits” is carried forward in CAA to apply to the rewritten material about know-how allowances. See section 452(3) of that Act.
The failure to preserve the application of the Capital Allowances Act 1990 definition of “mineral deposits” to the remaining provisions of Chapter 1 of Part 13 of ICTA is believed to have resulted from an oversight. The inclusion of a definition of “mineral deposits” in sections 192 and 583 corrects this error.
The definition of “mineral deposits” in sections 192 and 583 of this Act differs from the definition formerly in section 161(2) of the Capital Allowances Act 1990 in that the words “whether in the form of aquifers, hot dry rocks or otherwise” are omitted. The definition of “mineral deposits” in section 452(3) of CAA also omits these words. The omission was made in that Act on the basis that the words are merely illustrative and that leaving them out does not change the legal effect of the definition. They are omitted in this Act for the same reasons. A fuller discussion of this point can be found in Note 46 in Annex 2 to the Explanatory Notes to CAA.
This change clarifies the law by making it certain that the definition of “mineral deposit” continues to apply for the purposes described above.
This change clarifies the law and removes uncertainty. But it is expected to have no practical effect as it is in line with current practice.