BIM50730 - Literary profits: spread lump sum: payments for copyright

These reliefs do not apply to payments actually receivable after 5 April 2001. They were repealed by ICTA88/S95A, which introduced averaging (see BIM73000+).

ICTA88/S534, ICTA88/S535 and ICTA88/S538 provide that certain payments in respect of copyright etc which would normally be assessable as income of a single year, may be spread over a period of years.

ICTA88/S534 applies where the author of a literary etc work, who has spent more than twelve months on its production, receives as consideration for the assignment of the whole or part of the copyright or for the grant of a licence therein-

• a lump sum payment, including an advance on account of royalties which is not returnable; or
• any payment of, or on account of, royalties or sums payable periodically, which are receivable within two years after first publication of the literary etc work.

The author may claim that the payment should be spread back over two years (if the work took between twelve and twenty-four months to produce) or over three years (if the work took more than twenty-four months to produce).

ICTA88/S535 applies where, for author of a literary etc work receives a lump sum payment as consideration for the assignment of the whole or part of the copyright, or for the grant of a licence therein, and-

• the copyright is assigned etc for a period of two years or more; and
• the assignment etc is made not less than ten years after first publication of the work.

The author may claim that-

• where the copyright is assigned etc for six years or more, the lump sum payment should be spread forward over six years; or
• where the assignment etc is for two or more but less than six years, the payment should be spread forward over as many years as there are whole years in the period covered by the assignments etc.

Despite the repeal of ICTA88/S535, payments actually receivable before 6 April 2001 may be spread forward past that date. The section contains special provisions dealing with the case where the author dies, or their profession is permanently discontinued, during the period over which the lump sum payment has been spread. It is also provided that claims under ICTA88/S534 and ICTA88/S535 may not be made in respect of the same payment.

ICTA88/S538 applies to any sum received by a painter, sculptor or other artist for the sale of a painting, sculpture or other work of art, or by way of commission or fee for the creation of the work of art, where the artist-

• was engaged on the making of the work of art for a period of more than twelve months; or
• was engaged for a period of more than twelve months in making a number of works of art for an exhibition, and the work is one of them.

In this context, `work of art' covers all original works of artistic merit but does not extend to works of conventional craftsmanship of a commercial nature. The painter, sculptor or other artist may claim that the payment should be spread back over two years (if the work took between twelve and twenty-four months to produce) or over three years (if the work took more than twenty-four months to produce).