INTM620230 - Offshore Receipts in respect of Intangible Property (ORIP): Charge to tax on ORIP: Disregard for third party sales where IP makes an insignificant contribution

ITTOIA05/Ch2A/S608GA

Where a UK-derived amount is received by a person (Person A) within scope of the legislation and the UK sales to which the UK-derived amount relates are only UK sales by reason of the provision of goods, services or other property by an unconnected person (Person B) and not for any other reason, the legislation will not apply a charge where the contribution that the IP makes to the sale is insignificant.

In applying the rule, anything provided by a reseller is to be treated as provided by the person who provided it to the reseller. For this purpose, a 바카라 사이트渞eseller바카라 사이트� means a person to whom a thing is provided for resale.

In considering whether this disregard applies, the following non-exhaustive list of factors is relevant to whether intangible property makes an insignificant contribution to UK sales:

  • Whether Person A바카라 사이트檚 branding appears on Person B바카라 사이트檚 product;
  • Whether Person A바카라 사이트檚 brand is included in any of Person B바카라 사이트檚 marketing material for the product or service;
  • The relevance of Person A바카라 사이트檚 intangible property to the consumer purchasing Person B바카라 사이트檚 product or service;
  • The extent of Person A바카라 사이트檚 control over the use of its Intangible Property by Person B including marketing or other contractual obligations over the use of the IP;
  • Whether similar products or services to those of Person B are available or not, and whether Person A바카라 사이트檚 intangible property is a feature of those products or services;
  • Whether the price/value when considered against the amount charged/value of the outputs is insignificant (this may be considered in either absolute terms or relative terms);
  • and/or
  • The extent to which there are contractual arrangements that:
  • allow Person A to obtain certain information from Person B, for example sales data; or
  • entitle the supplier (Person A) to a share of Person B바카라 사이트檚 resulting revenue from the sale of the good, service or other property which utilises Person A바카라 사이트檚 intangible property.

Example 1

Group A sells software. They hold their intangible property (IP) in a Cayman Island based company. Group B is an unrelated airline based in a different territory (not the UK).

Group A바카라 사이트檚 IP attracts income via its group distributor that relates to direct UK and non-UK sales. The IP income that it is entitled to from the UK sales form part of its UK-derived amount and are subject to an income tax charge under ORIP.

Group A also gets IP income from direct non-UK customers, one such customer is Group B.

Group B is based solely in a non-UK territory, it purchases anti-virus software from Group A which it uses in its online booking system. The relevant factors identified above indicate that Group A바카라 사이트檚 IP is insignificant in relation to Group B바카라 사이트檚 sales (Group A바카라 사이트檚 brand is not present on the booking system and the use of Group A바카라 사이트檚 IP is unknown to Group B바카라 사이트檚 customers etc.)

Group B has a small number of bookings from UK customers, however these bookings will not count as indirect UK sales in respect of Group A바카라 사이트檚 UK-derived amount as they satisfy the insignificant contribution test.

In self-assessing any charge under Chapter 2A, taxpayers are expected to make appropriate reasonable efforts to determine whether sales made indirectly through third parties give rise to UK and non-UK sales and to quantify such sales. This would include obtaining such information through contractual or other arrangements, or where such information is not available using other reasonable data sources such as marketing, sales and other financial information, published financial reports, etc. Where sales are made directly or indirectly by related parties it is expected that such details regarding sales will be available.