Income Tax (Trading and Other Income) Act 2005

Chapter 7U.K.Annual payments not otherwise charged

683Charge to tax on annual payments not otherwise chargedU.K.

(1)Income tax is charged under this Chapter on annual payments that are not charged to income tax under or as a result of any other provision of this Act or any other Act.

(2)Subsection (1) does not apply to annual payments that would be charged to income tax under or as a result of another provision but for an exemption.

(3)The frequency with which payments are made is ignored in determining whether they are annual payments for the purposes of this Chapter.

(4)For exemptions, see in particular—

(a)sections 727 to 730 (certain annual payments by individuals),

(b)section 731 (periodical payments of personal injury damages),

(c)section 732 (compensation awards),

(d)section 734 (payments from trusts for injured persons),

(e)sections 735 to 743 (health and employment insurance payments),

(f)sections 744 to 747 (payments to adopters),

F1(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h)sections 757 to 767 (interest and royalty payments), and

(i)section 776 (scholarship income).

684Income chargedU.K.

(1)Tax is charged under this Chapter on the full amount of the annual payments arising in the tax year.

(2)Subsection (1) is subject to Part 8 (foreign income: special rules).

(3)The amount charged under this Chapter in the case of certain payments made by trustees in the exercise of a discretion is subject to [F2section 494 of ITA 2007](grossing up of discretionary payments from trusts).

685Person liableU.K.

The person liable for any tax charged under this Chapter is the person receiving or entitled to the annual payments.

[F3685ASettlor-interested settlementsU.K.

(1)This section applies if—

(a)a person receives an annual payment in respect of income from the trustees of a settlement,

(b)the payment is made in the exercise of a discretion (whether of the trustees of the settlement or any other person), and

(c)a settlor is charged to tax under section 619(1) on the income arising to the trustees of the settlement (whether in the current year of assessment or in a previous year of assessment) out of which the annual payment is made.

(2)This section applies only in respect of that proportion of the annual payment which corresponds to the proportion of the total income arising to the trustees of the settlement in respect of which a settlor is chargeable to tax under section 619(1).

(3)If and in so far as this section applies, the recipient of the annual payment shall be treated for the purposes of this Chapter as having paid income tax at the [F4additional rate] [F5or, in the case of a Scottish taxpayer, at [F6the highest Scottish rate]] in respect of the annual payment.

(4)But—

(a)tax which the recipient is treated by virtue of this section as having paid is not repayable,

(b)tax which the recipient is treated by virtue of this section as having paid may not be taken into account in relation to a tax liability of the recipient in respect of any other income of his, F7. . .

(c)F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)If the recipient of the annual payment is a settlor in relation to the settlement, if and in so far as this section applies the annual payment shall not be treated as his income for the purposes of the Income Tax Acts (and subsection (3) does not apply).

[F8(5A)If the recipient of the annual payment is treated by subsection (3) as having paid income tax in respect of the annual payment, the amount of the payment is treated as the highest part of the recipient's total income for all income tax purposes except the purposes of sections 535 to 537 (gains from contracts for life insurance etc: top slicing relief).

(5B)See section 1012 of ITA 2007 (relationship between highest part rules) for the relationship between—

(a)the rule in subsection (5A), and

(b)other rules requiring particular income to be treated as the highest part of a person's income.]

(6)[F9Sections 494 and 495 of ITA 2007] shall not apply in relation to an annual payment if and in so far as this section applies.]

686Payments received after deduction of taxU.K.

(1)[F10In accordance with section 848 of ITA 2007, a sum representing income tax deducted under Chapter 6 of Part 15 of that Act] from an annual payment within this Chapter is treated as income tax paid by the recipient F11. . .

(2)See also [F12section 494(3) of ITA 2007](sum treated as deducted from payments made under a discretionary trust treated as income tax paid by the person to whom the payment is made or the settlor).