Income Tax Act 2007 section 306

Excluded activities: receipt of royalties and licence fees

Section 306 explains when a trade that receives royalties or licence fees can avoid being treated as carrying on an excluded activity for venture capital trust (VCT) qualifying holdings purposes.

• A trade is not automatically excluded just because it receives a substantial amount of royalties or licence fees, provided those receipts are largely derived from exploiting relevant intangible assets.
• An intangible asset is a "relevant intangible asset" if the whole or greater part of its value was created by the relevant company itself, or by a company that was a qualifying subsidiary throughout the period of creation.
• Intangible assets are defined in line with generally accepted accountancy practice, and intellectual property includes patents, trademarks, registered designs, copyrights, design rights, performer's rights, plant breeder's rights, and equivalent rights under the laws of territories outside the United Kingdom.
• Where the relevant company acquired all the shares in another company solely by issuing its own shares at a time when only subscriber shares had been issued, references to the relevant company also include that acquired company.