Taxation of royalties

F

fortycoats

Guest
Hi,

I'm looking for advice on recording a royalty payment (from a patent) in my Form 11 tax return for 2010.

As I understand it, such payments used to be tax free, but since November 2010, they are now taxed. I've been told that these royalties are not classified as "Income". Does that mean that they are taxed as capital gains (and therefore subject to the capital gains tax free allowance), or are they taxed separately again. And if separate, what are the rates (or where can I find information about them)?

As I can best tell, I need to account for these under question 406 (a) in form 11 (I haven't paid any tax on them). Is that correct?
 
In case anybody else is interested in this question:

I mentioned the question to an accountant, and was informed that royalties are now taxed as income.
 
Check out restrictions on high earners for details of the changes to patent royalties
Normally patent royalties are subject to 20% withholding tax.
 
Joe_90 said:
Check out restrictions on high earners for details of the changes to patent royalties
Normally patent royalties are subject to 20% withholding tax.
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I never did figure a definition for "high earners". However (in 2010 at least), this wouldn't apply to me regardless as my total earnings were less than 20K.

There was no tax witheld on the royalties.
 
Gekko said:
When were the royalties paid?
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December 2010, so it would have been after the changes to the rules in the November budget.

Joe_90 is suggesting that the tax should be 20%, but the accountant I spoke to today said it would be taxed as income.

Is there a special tax category for patent royalties or how does it work?
 
fortycoats said:
Joe_90 is suggesting that the tax should be 20%, but the accountant I spoke to today said it would be taxed as income.
Click to expand...

Being subject to withholding tax at 20% bears no relationship to the effective tax rate.

Why had your accountant not advised you on the correct treatment?
 
Joe_90 said:
Being subject to withholding tax at 20% bears no relationship to the effective tax rate.
Click to expand...

Fair enough, my mistake, I thought you meant that 20% would typically be withheld, and from that I extrapolated (an obviously incorrect assumption) that was the full amount owed.

Why had your accountant not advised you on the correct treatment?
Click to expand...

That's why I'm on here. After talking to an accountant, I still didn't understand the correct treatment... :-(
 
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