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Income Tax (Trading and Other Income) Act 2005

Section 722: Consideration for the grant of annuities

2778.This section contains rules to deal with the case where the purchase of the annuity is part of a composite transaction. It is based on section 656(4) of ICTA.

2779.For example, capital protected annuities, which provide for the return on death of the purchase consideration less the annuity payments made to date, could be regarded as a composite of an annuity and a life insurance. However, under subsection (2) the consideration given for a capital protected annuity is treated as given for the annuity alone.

2780.Subsections (3) and (4) provide for the consideration to be apportioned on a just and reasonable basis. Although the source legislation refers to apportionment on a “just” basis, just and reasonable is used in subsections (3) and (4) in line with the approach which has been adopted throughout the Act that all apportionments are on a just and reasonable basis. See Change 14 in Annex 1

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