INTM620110 - Introduction to Offshore Receipts in respect of Intangible Property (ORIP): Introduction

What is ORIP?

The Offshore Receipts in respect of Intangible Property (‘ORIP’) rules were introduced by Finance Act 2019 and took effect from 6 April 2019. The rules, at s608A et seq, ITTOIA 2005, aim to discourage multinational groups from placing intangible property (IP) in low tax jurisdictions where income will be subject to no or low tax.

Generally, an entity will be within the scope of ORIP where it is not:

  • UK resident, nor;
  • Resident in a full-treaty territory (a territory with whom the UK has a full Double Taxation Agreement that contains a non-discrimination article). A list of full treaty territories can be found at INTM620730.

ORIP imposes an Income Tax charge on the offshore entity on the ‘UK-derived amounts’ that arise to it in the tax year. A UK-derived amount is any amount – capital or revenue – in respect of IP rights which ‘enable, facilitate or promote UK sales.’ UK-derived amounts may arise directly or indirectly in the form of an income stream or as part of the costs/sales proceeds of goods/services, for example where there is an embedded royalty.

Exemptions

There are several exemptions from the ORIP charge, including;

  • If the group’s UK turnover is £10m or less,
  • If substantially all of the IP’s related business activity has always been undertaken in the territory of residence, and/or
  • If foreign tax is at least 50% of the ORIP tax charge

The measure is consistent with the UK’s international obligations, and thus respects situations in which the UK has ceded taxing rights over the UK source income of a non-resident person under a Double Tax Arrangement (DTA).

The exemptions are described further at INTM620300 onwards.

Anti-avoidance legislation

A targeted anti-abuse rule (TAAR) is effective from 29 October 2018 to protect against arrangements designed to avoid the charge. This includes arrangements which involve transferring the ownership of the IP to another group entity in a full treaty territory.

The TAAR provisions are explained further at INTM620510.

Administration of ORIP

The first taxable period is the 2019/20 tax year, for which amounts will be due and payable by 31 January 2021. Form SA700 must be filed in paper form by 31 January following the year of assessment. The tax liability will arise to the non-resident company however HMRC can issue a payment notice to other persons in the same control group if any liability remains unpaid after 6 months.

Administration of ORIP is explained further at INTM620600.

ORIP Compliance Activity

HMRC has created a central team to undertake ORIP compliance work. This team will work in collaboration with CCMs for customers within HMRC’s LB population.