PART VIII TAXATION OF INCOME AND CHARGEABLE GAINS OF COMPANIES
Taxation of income
F1338B Charges on income: annuities or other annual payments
1
An annuity or other annual payment is a charge on income if—
a
the requirements specified in subsection (2) are met, and
b
it is not excluded from being a charge on income for the purposes of corporation tax—
i
by any of the following provisions of this section, or
ii
by any other provision of the Corporation Tax Acts.
2
The requirements are that the payment—
a
is made under a liability incurred for a valuable and sufficient consideration,
b
is not charged to capital,
c
is ultimately borne by the company, and
d
in the case of a company not resident in the United Kingdom, is incurred wholly and exclusively for the purposes of a trade which is or is to be carried on by it in the United Kingdom through a branch or agency.
3
An annuity or other annual payment made to a person not resident in the United Kingdom shall be treated as a charge on income only if the following conditions are met.
4
The conditions are that the company making the payment is resident in the United Kingdom and that either—
a
the company deducts tax from the payment in accordance with section 349, and accounts under Schedule 16 for the tax so deducted, or
b
the person beneficially entitled to the income in respect of which the payment is made is a company that is not resident in the United Kingdom but which carries on a trade in the United Kingdom through a branch or agency and the payment falls to be brought into account in computing the chargeable profits (within the meaning given by section 11(2) of that company, or
c
the payment is one payable out of income brought into charge to tax under Case V of Schedule D.
5
An annuity or other annual payment is not a charge on income if—
a
it is payable in respect of the company’s loan relationships, or
b
it is a royalty to which Schedule 29 to the Finance Act 2002 applies (intangible fixed assets).
6
Nothing in this section prevents an annuity or other annual payment from being a charge on income if it is a qualifying donation (within the meaning of section 339).