Section 808 — Income Tax Act 2007: Meaning of “disposal of the licence” etc

Meaning of “disposal of the licence” etc 808 1 For the purposes of section 805 any reference to—

a a disposal of a licence acquired in carrying on a trade, or b a disposal of a right to income under an agreement related to or containing a licence acquired in carrying on a trade (“a licence-related agreement”), includes, in particular, any of events A to E.

2 Event A is the revocation of the licence.

3 Event B is the disposal, giving up or loss of—

a a right under the licence, or b a right to income (or any part of any income) under a licence-related agreement, by the individual or by a firm in which the individual is a partner. It does not matter if the right is disposed of, given up or lost as part of a larger disposal, giving up or loss.

4 Event C is the disposal, giving up or loss of the individual's interest in a firm that has the licence or a right to income under a licence-related agreement (including the dissolution of the firm).

5 Event D is a default in the payment of income to which—

a the individual, or b a firm in which the individual is a partner, has a right under a licence-related agreement.

6 Event E is a change in the individual's entitlement to any profits or losses relating to the licence the effect of which is that—

a the individual's share of any profits is reduced (including to nil), or b the individual becomes entitled to a share, or a greater share, of any losses without becoming entitled to a corresponding share of profits.

7 The changes covered by event E include cases where there is an agreement under which the individual is entitled—

a to a particular share of any profits or losses relating to the licence in a period (including a nil share),

and b to a different share of any such profits or losses in a succeeding period (including a nil share).

8 In such cases the change in the individual's entitlement is treated for the purposes of section 805 as occurring at the beginning of the succeeding period.

9 For the purposes of this section—

a references to any profits relating to the licence are to any profits deriving to any extent from income to which the individual has a right under a licence-related agreement, and b references to any losses relating to the licence are to losses deriving to any extent from expenditure incurred in exploiting the licence.