BIM50705 - Literary profits: receipts
Where the liability arises under Case II, the profits are to be
computed inclusive of all receipts from copyright and other
sources, including lump sums received for the outright assignment
of copyright (for example the assignment of copyright as a whole,
or of serial rights or of rights in particular editions, or of
film, television or radio rights). This is because the
author’s brain is his or her fixed capital. Copyright is a
product of the author’s brain. It is circulating capital and
exploiting it gives rise to income. Similarly sales of manuscripts
give rise to income (Wain v Cameron [1995] 67TC324). For more on
the capital/revenue divide as it relates to authors see
BIM35725 - BIM35735.
Where the liability is under Case VI, the profits should be
similarly computed, except that lump sums received for the
assignment of copyright only (see Nethersole v Withers [1948]
28TC501), as distinct from lump sum and similar payments associated
with services (see Hobbs v Hussey [1942] 24TC153, and Housden v
Marshall [1958] 38TC233), should be excluded. In this
connection-
- a lump sum does not include a sum received on account of royalties or an amount arrived at by reference to a minimum or estimated number of copies of a book or performances of a work
- an assignment, that is a transfer of ownership of a copyright, should be distinguished from a licence which permits the licensee to use copyrighted matter but does not involve any change in the ownership of the copyright
- a lump sum payment not assessable under Case VI should be considered for Capital Gains Tax liability.
If, in an assignment case, the question of liability under Schedule D turns on whether or not a profession is being exercised, consideration should be given to the taxpayer's activities both before and after the assignment.
