Duties, royalties and taxes

Duties, royalties and taxes payable by private parties

What duties, royalties and taxes are payable by private parties carrying on mining activities? Are these revenue-based or profit-based?

The profits arising out of land used for mining activities are generally subject to the usual corporate income tax regime. No royalties (unless specified in the agreement with the landowner) are generally payable in the conduct of mining activities.

Stamp Duty Land Tax (SDLT) is payable on leases of mining rights. In the absence of exclusive possession, the lease may be deemed a licence (which is outside the scope of SDLT).

On the basis that a trade has commenced, the lessor of the mineral right may receive rent which should be taxed accordingly as part of that party’s income. Conversely, the lessee paying rent will usually treat this as a normal business expense.

Tax advantages and incentives

What tax advantages and incentives are available to private parties carrying on mining activities?

There is no special tax regime in place for private parties carrying on metallic mining activities in the United Kingdom.

Tax stablisation

Does any legislation provide for tax stabilisation or are there tax stabilisation agreements in force?

There is generally no concept of tax stabilisation in the United Kingdom in relation to the mining industry.

Carried interest

Is the government entitled to a carried interest, or a free carried interest in mining projects?

There is no state carried interest entitlement in the United Kingdom.

Transfer taxes and capital gains

Are there any transfer taxes or capital gains imposed regarding the transfer of licences?

There are generally no transfer taxes payable (save where a right in land is being transferred as opposed a right to extract from land), but there could be capital gains charges, based on the acquisition value of the licence and the transfer value, to the extent that the licence is owned by a UK company. If the transfer is to a connected party, the market value rule would apply.

Distinction between domestic parties and foreign parties

Is there any distinction between the duties, royalties and taxes payable by domestic parties and those payable by foreign parties?

There is no distinction. Duties, royalties and licences in the extractive industry are generally taxed according to the location of the resource, not the location or nationality of the parties involved.