Income and Corporation Taxes Act 1988

348 Payments out of profits or gains brought into charge to income tax: deduction of tax. U.K.

(1) M1 Subject to any provision to the contrary in the Income Tax Acts, where any annuity or other annual payment [F1 to which this subsection applies] is payable wholly out of profits or gains brought into charge to income tax—

(a) the whole of the profits or gains shall be assessed and charged with income tax on the person liable to the annuity or other annual payment, without distinguishing the annuity or other annual payment; and

(b) the person liable to make the payment, whether out of the profits or gains charged with income tax or out of any annual payment liable to deduction, or from which a deduction has been made, shall be entitled on making the payment to deduct and retain out of it a sum representing the amount of income tax thereon; and

(c) the person to whom the payment is made shall allow the deduction on receipt of the residue of the payment, and the person making the deduction shall be acquitted and discharged of so much money as is represented by the deduction, as if that sum had been actually paid; and

(d) the deduction shall be treated as income tax paid by the person to whom the payment is made.

[F2 (1A) Subsection (1) applies to any annuity or other annual payment, not being interest—

(a) which is charged with tax under Case III of Schedule D,

[F3 (aa) which—

(i) is charged with tax under Chapter 7 of Part 4 of ITTOIA 2005 (purchased life annuity payments), Chapter 10 of that Part (distributions from unauthorised unit trusts), section 579 of that Act (royalties etc. from intellectual property), Chapter 4 of Part 5 of that Act (certain telecommunication rights: non-trading income) or Chapter 7 of Part 5 of that Act (annual payments not otherwise charged), and

(ii) is not relevant foreign income,]

(b) which is charged with tax under Part 9 of ITEPA 2003 (pension income) because section 605 of that Act applies to it (retirement annuity contracts: annuities), or

(c) which arises from a source in the United Kingdom and is charged with tax under Part 9 of ITEPA 2003 because section 609, 610 or 611 of that Act applies to it (certain employment-related annuities).]

(2) Subject to any provision to the contrary in the Income Tax Acts, where—

(a) any royalty or other sum paid in respect of the user of a patent; F4 . . .

(b) F4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

is paid wholly out of profits or gains brought into charge to income tax, the person making the payment shall be entitled on making the payment to deduct and retain out of it a sum representing the amount of the income tax thereon.

(3) M2 This section does not apply to F5 . . . any payment to which section 687 applies F6 . . . [F7 or to any payment which is a qualifying donation for the purposes of section 25 of the M3 Finance Act 1990].

[F8 (4) For the purposes of this section and section 349(1), the following income shall be treated as not brought into charge to income tax—

(a) income on which income tax is treated as paid under section 399(2) or 400(2) of ITTOIA 2005 (distributions from UK resident companies etc. on which there is no tax credit),

(b) income on which an individual is liable to income tax as a result of section 413(2) of that Act or trustees are so liable as a result of section 413(3) of that Act (stock dividend income),

(c) income on which any person is liable to income tax under Chapter 6 of Part 4 of that Act (release of loan to participator in close company),

(d) income on which an individual is liable to income tax as a result of section 465 of that Act or trustees are so liable as a result of section 467 of that Act (gains from contracts for life insurance etc.), being income to which section 530 of that Act applies (income tax treated as paid etc.), and

(e) income which is included in the aggregate income of an estate as a result of section 664(2)(c), (d) or (e) of that Act (income arising to personal representatives and corresponding to income within paragraph (b), (c) or (d)).]

Textual Amendments

F1 Words in s. 348(1) substituted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 50(2) (with Sch. 7)

F2 S. 348(1A) inserted (6.4.2003 with effect in accordance with s. 723(1) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 6 para. 50(3) (with Sch. 7)

F3 S. 348(1A)(aa) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 147(2) (with Sch. 2)

F4 S. 348(2)(b) and preceding word repealed (with effect in accordance with Sch. 18 Pt. 6(2) Note of the repealing Act) by Finance Act 1997 (c. 16), Sch. 18 Pt. 6(2)

F5 Words repealed by 1988(F) Sch.14 Part IV—in respect of payments made on or after 6April 1989.

F6 Words in s. 348(3) repealed (with effect in accordance with s. 111(6)(a) of the repealing Act) by Finance Act 2000 (c. 17), Sch. 40 Pt. 2(17), Note 1

F7 Words in s. 348(3) inserted (with effect in accordance with s. 41(9) of the amending Act) by Finance Act 2000 (c. 17), s. 41(3)

F8 S. 348(4) inserted (6.4.2005 with effect in accordance with s. 883(1) of the amending Act) by Income Tax (Trading and Other Income) Act 2005 (c. 5), Sch. 1 para. 147(3) (with Sch. 2)

Modifications etc. (not altering text)

C1 See also1970(M) s.90—interest on unpaid tax.1970(M) s.106—avoidance of agreements for payment without deduction of tax.1989 s.94and Sch.11 para.18—deep gain securities.S.I. 1970 No.448 (in Part III Vol.5) regns. 2-11—procedure for payment without deduction of tax of income exempt under double taxation arrangements.

Marginal Citations

M1 Source-1970 s.52; 1971 Sch.6 20(c); 1973 s.17(1)

M2 Source-1970 s.65(2)

M3 1990 c. 29.