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HMRC updates guidance on payments for image rights

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HMRC has published a brief guide to the tax treatment of payments for image rights, together with new additions to the Employment Income Manual at EIM00732 onwards. The government announced at Spring Budget 2017 its intention to issue guidelines for employers ‘to improve the clarity of the existing scheme’.

The guidance sets out the various methods by which the receipt of an image rights payment could be taxed, namely, whether it is received:

·         in a self-employed capacity, in which case it would be taxable professional income disclosed on the self-assessment tax return;

·         in an employed capacity in respect of the employee’s duties of employment, in which case it would be taxed via the PAYE system;

·         by a corporate entity, such as an image rights company which, if resident in the UK, would be chargeable to UK corporation tax on its profits; and

·         if the individual whose image rights are exploited in return for payment is a director or shareholder of the image rights company, any payments of salary or dividends to that individual should be taxed in the normal way.

Referring to the Special Commissioners’ decision in Sports Club v HMIT [2000] STC (SCD) 443, the guidance notes that, in relation to separate contracts designed to exploit an employee’s image for promotional and merchandising purposes, HMRC will ‘expect the respective agreements to be demonstrably based in commercial reality’ if a distinction is to be made between remuneration and image rights.


Issue: 1366
Categories: News