PART XVII TAX AVOIDANCE

CHAPTER VI MISCELLANEOUS

Other provisions

F1775ATransfers of rights to receive annual payments

1

This section applies in any case where—

a

a person sells or transfers the right to receive an annual payment to which this section applies (see subsection (4)), and

b

the consideration (if any) for the sale or transfer would not, apart from this section, be chargeable to tax.

2

In any such case, tax is charged—

a

in the case of income tax, under this section; or

b

in the case of corporation tax, under Case III of Schedule D.

3

Where this section applies—

a

the tax is charged on an amount equal to the market value of the right to receive the annual payment;

b

the tax is charged for the chargeable period in which the sale or transfer takes place;

c

the person liable for the tax is the person who sells or transfers the right to the annual payment.

4

This section applies to any annual payment other than—

a

an annual payment under a life annuity;

b

an annual payment under a pension annuity;

c

an annual payment to which section 347A applies (annual payments that are not charges on income);

d

an annual payment in respect of which, by virtue of section 727 of ITTOIA 2005 (payments by individuals arising in UK), no liability to income tax arises under Part 5 of that Act.

5

This section applies in relation to part of an annual payment as it applies in relation to the whole of an annual payment.

6

For the purposes of this section, a sale or transfer of all rights under an agreement for annual payments, or under an annuity, is a sale or transfer of the rights to each individual payment under the agreement or annuity.

7

In this section—

  • “life annuity” means—

    1. a

      a life annuity, as defined in section 657(1); or

    2. b

      a life annuity, as defined in section 473(2) of ITTOIA 2005;

  • “pension annuity” means an annuity which is pension income within the meaning of Part 9 of ITEPA 2003 (see section 566(2) of that Act).