Income Tax (Trading and Other Income) Act 2005 section 766

Interest and royalty payments: interpretation

Section 766 provides definitions of key terms used throughout the interest and royalty payments exemption provisions, ensuring consistent interpretation of concepts such as interest, royalties, debt-claims, the Directive, and non-EU permanent establishments.

• Defines "interest" as income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor's profits, including income from government securities and bonds
• Defines "royalties" as payments received for the use of, or the right to use, intellectual property such as copyrights, patents, trade marks, designs, models, plans, secret formulae, processes, and industrial, commercial or scientific equipment
• Defines "debt-claim" as a claim arising from a transaction for the lending of money, and explains that penalty charges for late payment do not count as interest
• Defines "the Directive" as the EU Interest and Royalties Directive (2003/49/EC) and defines "non-EU permanent establishment" as a permanent establishment situated outside the United Kingdom that is not in an EU member state