ICTA88/S122 provides broadly that mineral royalties receivable
by persons resident or ordinarily resident in the UK, hitherto
treated as wholly income, are to be regarded as divisible into
equal income and capital parts. The half regarded as income remains
subject to IT or CT and the half regarded as capital is to be
charged to CGT (or as a chargeable gain for CT purposes) (see
CG71700 onwards).
This treatment applies to mineral royalties receivable on or
after 6 April 1970 irrespective of the date of the agreement under
which they were payable.
From 1 May 1995 FA95/SCH29/PARA22 abolished the need to
deduct IT from payments and for them to be treated as a charge.
They can now be paid gross with the payment treated as a Case I
deduction.
Previously the whole of the mineral royalty was received
under deduction of tax (ICTA88/S55 and ICTA88/S119) and relief from
IT was given to an individual or non-corporate body by repayment
after setting off the CGT liability on the half regarded as capital
(see BIM62098). It followed that relief was available under
ICTA88/S121 (RE3170 onwards) in respect of only half of any
management expenses.
