ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with current practice. Change 96: Charitable trusts: exemption for income from intellectual property etc: section 536
This change provides an exemption from income tax for certain royalties and other income from intellectual property and certain income derived from a relevant telecommunication right, whether or not the income is annual in nature.
Section 505(1)(c)(ii) of ICTA provides for an exemption from tax in respect of (among other things) income chargeable under section 579 of ITTOIA and income chargeable under Chapter 4 of Part 5 of ITTOIA. But only, in each case, to the extent that the income relates to annual payments.
Section 579 of ITTOIA charges royalties etc from intellectual property and Chapter 4 of Part 5 charges certain telecommunication rights. In each case the charge to tax is on income that does not arise from the carrying on of a trade. So the income chargeable under the provisions referred to can be annual in nature, but need not be so. Prior to ITTOIA, income of this sort was chargeable under Schedule D Case III if annual in nature, and under Schedule D Case VI if not. So the exemption applied only to Case III income.
But in practice HMRC allow an exemption for income chargeable under section 579 or under Chapter 4 of Part 5 whether or not it is annual in nature. This change is in line with that practice, and reflects the unity of the charging provisions post-ITTOIA.