INTM620330 - Offshore Receipts in respect of Intangible Property (ORIP): Exemptions: Business in territory of residence

ITTOIA05/Ch2A/S608K

This section provides an exemption for cases where the relevant intangible property is held in the territory where all of the related business activity that generates profits in relation to that intangible property takes place.

This exemption applies to a person who is resident in a territory throughout a tax year and where all, or substantially all, of the business activity in relation to the relevant intangible property has always been undertaken.

A claim has to be made in order for this exemption to apply (and this exemption only). A claim can be made using the additional information box on the SA 700. Alternatively, a claim may be made to the following address. Provided HMRC have provided a response accepting this claim before the deadline to notify chargeability (i.e. 5th October, following the end of the first year of being within scope of UK Income Tax through ORIP), it will not be necessary to notify. HMRC will aim to respond to claims within 30 days.

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For the purposes of this exemption, the definition of residence in section 608D is amended, so that the exclusion for persons only liable to tax on a territorial or remittance basis, and the exclusion for persons subject to an express denial of relief under a double taxation agreement, do not apply. The effect of this adjustment is that the definition of residence for the purposes of Section 608K is wider than the definition of residence which generally applies for Chapter 2A.

Relevant intangible property is any intangible property that gives rise to UK-derived amounts arising to the person under consideration for that tax year.

Relevant activity can be activity carried out by any person either for the purpose of creating, developing or maintaining any intangible property, or for the purpose of generating income or capital amounts for the relevant person that relate to the enjoyment or use of rights to the relevant intangible property.

The exemption cannot apply if there is a “relevant connection” between the relevant intangible property and any person related to the relevant person.

A relevant connection exists where the relevant intangible property:

• has been transferred from a related person, or
• has been derived from anything transferred from a related person, or
• derives from any intangible property held by a related person.

A definition of related persons is provided in Section 608T (see INTM620770).

These conditions are intended to cover the various ways in which intangible property, or the value of some or all of that intangible property, can be transferred between related parties.

This exemption will only apply where intangible property has not been moved between different territories and where all, or substantially all, of the business activity needed to create, develop or maintain that intangible property, or generate amounts of income or capital in relation to the enjoyment or use of the rights that constitute that intangible property, takes place in the same territory as that in which the intangible property is held.