Mineral royalties

The trustees of various family settlements owned the mineral rights over land and granted wayleaves to mining companies to drill for coal. The payments were paid to the beneficiary (the appellant) of the settlements. The appellant claimed that TA 1988 s 122 applied to the payments so that half was taxable as income and the rest as chargeable gains under TCGA 1992 s 201.

HMRC assessed the payments on the basis that they were rents falling under TA 1988 s 119 and therefore wholly income. The appellant appealed. He claimed that the wayleave agreement conferred a right to win and work minerals. This was a composite expression meaning the action of extracting minerals from the ground.

The Special Commissioner looked at the wording of TA 1988 s 122(5) which defined mineral royalties as receipts under a 'mineral lease or agreement [which]...