From its inception, the Guernsey Image Right was never a tax
product, but an IP one. It is ironic, therefore, that a synopsis of
the benefits over unregistered rights has been issued by the body
governing the collection of taxes in the UK - HMRC.
In an update to its practice manual HMRC has set out the
position relating to image rights in the UK and how the lack of any
formal right there potentially impacts upon any sports stars or
celebrities who have, or are entering into, contracts for their
image rights. In a step by step analysis, HMRC effectively explains
the current position in the UK vis-a-vis image rights and the
potential tax treatment of those various rights.
To summarise its manual update, HMRC broadly states the
IMAGE RIGHTS GENERALLY
There is no such thing as an image right in the UK. As a result
of this, the only way to gain any sort of protection over indicia
relating to a personality is through passing off, based on
reputation or goodwill. Both of these points are borne out by last
year's Rhianna v TopShop case.
ASSIGNMENT OF IMAGE RIGHTS
When assigning image rights, as there is no such thing in the
UK, the only asset that is actually being transferred is therefore
goodwill. The establishment of goodwill is something that is
dependant upon there being an underlying business in operation.
HMRC makes specific reference to the fact that the mere
registration of a trade mark, for instance, will not create an
asset of value, nor goodwill, without a related business to back it
up. In order to properly assign the goodwill (and therefore the
image rights), this underlying business has to be transferred,
otherwise no effective transfer has taken place.
If it is assumed that the business of many personalities is
actually the licensing out of their name and likeness, this total
business would have to be assigned to be effective. If the
personality does not have any track record of licensing out their
image, then no business or goodwill will exist, making any transfer
of image rights problematic. This is of particular concern when
dealing with young players or performers.
HMRC talks of the Guernsey Image Rights and acknowledges that,
due to their registered nature, these may be considered to be
readily assignable image rights and not goodwill. This is an
important distinction and one which may prove useful to many
clients in this position.
Where there is said to have been a disposal of non-UK image
rights, questions will be asked by HMRC as to the viability of the
image rights regime in the jurisdiction concerned. Again, this is
of particular interest as other jurisdictions do not have an
established formal regime such as we have in Guernsey.
All of the above demonstrates the benefits of establishing
formal rights in Guernsey. These rights not only clarify the rights
concerned, but also negate the need for goodwill to have been
established, as neither use of the rights nor fame or reputation
are required for the registration of the Guernsey rights.
Guernsey has a unique product which has been recognised as
providing both clarity and formality over what had previously been
an amalgam of non-specific rights trying to be used over and above
what they were designed for. The guidance issued by HMRC provides a
timely reminder to those in the UK of the benefits of these rights
and gives those of us dealing with these rights in Guernsey a
valuable insight into HMRC's current thinking on this topical
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
As reported in the market updates section of this newsletter, the UAE Ministry of Economy recently reviewed the fees charged by its various departments, including the Trade Mark, Patent and Copyright Office.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).