Income Tax (Trading and Other Income) Act 2005 section 340

Relief in respect of mineral royalties

Section 340 provides that only half of the net profit from mineral royalties is subject to income tax, with the other half being subject to capital gains tax instead.

• Where a person receives mineral royalties taxed under Chapter 8 of Part 3 of the Act, only 50% of the net profit is charged to income tax.
• The remaining 50% of the net profit is charged to capital gains tax under section 201 of the Taxation of Chargeable Gains Act.
• This relief applies specifically to mineral royalties taxed under Chapter 8; where royalties are taxed under different chapters, equivalent relief is available through sections 157 or 319 of the same Act.
• The provision was originally introduced in the Finance Act 1970 to mitigate the high combined tax burden when income was also subject to betterment levy and surtax, and has been retained despite those taxes being abolished.