In general the receipt of royalties or licence fees is an excluded activity that is not a qualifying trade for the purposes of EIS (see E3.142)1.
Definition of royalties and licence fees
| Term | Commentary |
| Royalties | Royalties are received where property rights such as copyright or design rights are exploited in trade, by granting permission for their use (eg the grant by a publisher of the right to publish a book in return for royalties based on sales). Where the receipt of royalties is not a substantial part of the trade the trade does not become an excluded activity2. |
| Licence fees | Licence fees are received where certain kinds of property rights are exploited in trade, by allowing others to use the property (eg by operating a car park).
However, if the use of the property is incidental to the supply of services then the activity may not be an excluded trade3.
Letting out a sports facility by the hour would be a non-qualifying activity, but HMRC accept that payments for admission |
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