Income Tax (Trading and Other Income) Act 2005

839 Annual payments payable out of relevant foreign income U.K.

(1) In calculating the amount of relevant foreign income to be charged to income tax for a tax year, a deduction is to be allowed for an annual payment other than interest if it meets conditions A to C.

(2) Condition A is that the payment is payable out of the relevant foreign income.

(3) Condition B is that, had the payment arisen in the United Kingdom, it would have been chargeable to income tax under one of the following provisions or to corporation tax under Case III of Schedule D—

• Chapter 10 of Part 4 (distributions from unauthorised unit trusts),

• section 579 (charge to tax on royalties and other income from intellectual property),

• Chapter 4 of Part 5 (certain telecommunication rights: non-trading income), or

• Chapter 7 of Part 5 (annual payments not otherwise charged).

(4) Condition C is that the payment is made to a non-UK resident.

(5) Subsection (1) does not apply if—

(a) the relevant foreign income is received in the United Kingdom, or

(b) it is charged for the tax year in accordance with section 832 (relevant foreign income charged on remittance basis).

(6) In the case of relevant foreign income chargeable under Chapter 2 or 17 of Part 2 (trading income) that arises in the Republic of Ireland, this section applies with the omission of condition B and subsection (5)(a).