The problem with Intellectual Property (IP)

29 November 2023      Julia Ascott, Employment Taxes Specialist

If you’ve read the Independent Review of University Spin-out Companies, you may have seen (page 38 if you didn’t get that far) a section on IP ownership. It states “Some, although comparatively very few, universities or regimes operate a policy of IP being owned by academics, not by the universities – sometimes called ‘professor’s privilege’”.

Conversations within the HE sector identifies a lack of understanding that this ‘professor’s privilege’ isn’t the norm. In the vast majority of arrangements, employees of a university (as part of their employment contract) will have no right to any IP created and developed whilst an employee; the IP belongs to the university. If you consequently make a payment of ‘royalties’ to the academic as a result of IP they have developed, it is not a royalty, it is simply a share of profits that is likely to be employment income for PAYE and NIC.

Going further, if that employee leaves your employment, the nature of the payment doesn’t change, it remains a payment of employment income and should be treated as such.

Only where the academic has clear ownership of the IP can a genuine payment of royalties be made, however, there are still withholdings to consider, especially if the individual now resides overseas. If you need a refresh or reminder of the rules, we will be running an IP webinar in the new year.

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