Introduction

Generally, where a company owns minerals, and receives royalties in respect of those minerals, those royalties are charged to tax. A company which is entitled to receive mineral royalties before 1 April 2013 under a mineral lease or agreement is charged to corporation tax on one-half of those royalties (the ‘income segment’) only. The remainder of the royalties (the ‘capital segment’) is chargeable to tax under TCGA 1992, s. 201 as if it were a chargeable gain (see ¶799-400) (CTA 2009, s. 273). Two conditions apply for this treatment:

(1)a UK-resident company must be entitled to receive mineral royalties under a mineral lease or agreement; and

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