OT20206 - Corporation Tax General

Payments under Licences

Responsibillity for the issue of licences rests with the DTI. See the section of the Manual on the DTI role. The terms under which licences have been issued in the various rounds vary substantially but essentially there have been payments under three headings.

Initial Fees

Annual Rental Fees

Royalties

The CT consequences of the three kinds of payments are outlined as follows:

Initial Fees

These are incurred on the application for and grant of a licence and are normally small in amount, possibly only a few £thousands. However, certain licences have been issued under a system of competitive bidding where the payments were substantial. Initial fees are capital and eligible for MEA at a 10% rate of writing down allowance.

Annual Rental Fees

These are not large in amount and are revenue.

Royalties

These are charged at a set annual percentage of the value of production (either in cash or in kind) and are revenue.