Legalize / United Kingdom / Public General Act

Income Tax (Trading and Other Income) Act 2005

Type Public General Act

Publication 2005-03-24

Last updated 2026-01-20

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(2) Rules A and B apply to determine in relation to such an absolute interest—

(a) whether the person with the interest has an assumed income entitlement in respect of the interest, and

(b) if so, its amount.

(3) Rule A is that the person's share of the residuary income of the estate in respect of the absolute interest for any tax year is treated as including any amount which would be included in it if—

(a) the interest had subsisted throughout the period when any such limited interest subsisted, and

(b) no such limited interest had ever subsisted.

(4) Rule B is that the basic amounts relating to the absolute interest are treated as including the basic amounts relating to any such limited interest.

Successive interests: payments in respect of limited interests followed by absolute interests

673

(1) This section applies if—

(a) two or more interests in the whole or part of the residue of an estate are held successively during the administration period by different persons,

(b) each later interest arises or is created on the cessation of the previous interest otherwise than by death,

(d) at least one of the interests preceding that interest is a limited interest.

(2) A sum to which a person (“P”) with such an absolute interest is entitled in respect of any such limited interest which is paid while P has the absolute interest is treated as paid in respect of the absolute interest (and not the limited interest).

(3) Subsection (4) applies if—

(a) P's absolute interest ceases during the administration period, and

(b) a sum to which P is entitled in respect of any such limited interest—

(i) is paid after the absolute interest ceases but before the end of the administration period, or

(ii) remains payable at the end of it.

(4) This Chapter applies as respects any such sum as if the limited interest had continued to subsist while that absolute interest subsisted and had been held by P.

(5) Subsection (4) is subject to subsection (6).

(6) For the purposes only of section 668 (reduction in share of residuary income of estate), any such sum is treated as paid or payable in respect of the absolute interest.

Successive interests: holders of limited interests

674

(1) This section applies if—

(a) two or more interests in the whole or part of the residue of an estate are held successively during the administration period by different persons,

(b) the earlier or, if there are more than two, the earliest of the interests is a limited interest, and

(2) Income is treated as arising from a limited interest in the whole or part of the residue of the estate in a tax year in cases A, B and C.

(3) Case A is where—

(a) one of the successive interests subsists at the beginning of the tax year,

(b) a sum is paid in respect of one of the interests in that year and before the end of the administration period, and

(c) a person who has or has had one of the interests which is a limited interest (“a limited holder”) is entitled to receive the payment.

(4) Case B is where—

(a) the tax year is the final tax year,

(b) one of the successive interests subsists at the beginning of that year,

(d) a limited holder is entitled to receive the payment.

(5) Case C is where—

(a) the tax year is a year before the final tax year,

(b) the last of the successive interests ceases in the tax year,

(i) paid in respect of one of the interests in a later tax year but before the end of the administration period, or

(ii) remains payable in respect of it at the end of that period, and

(d) a limited holder is entitled to receive the payment.

Basic amount of estate income: successive limited interests

675

The basic amount of estate income relating to a limited interest within section 674 for a tax year is the total of the sums within section 674(3)(b), (4)(c) and (5)(c) for that year.

Apportionments

676

(1) Such apportionments as are just and reasonable are to be made for the purposes of this Chapter if—

(a) the part of a residuary estate in which an interest within any of the provisions specified in subsection (2) subsists does not wholly correspond with the part in which another such interest held successively subsists, or

(b) one of those interests is in the whole of the residuary estate and the other is only in part of it.

(2) The provisions are—

section 671 (successive absolute interests),

section 672 (successive interests: assumed income entitlement of holder of absolute interest following limited interest),

section 673 (successive interests: payments in respect of limited interests followed by absolute interests),

section 674 (successive interests: holders of limited interest), and

section 675 (basic amount of estate income: successive limited interests).

Relief where foreign estates have borne UK income tax

Relief where UK income tax borne by foreign estate: absolute interests

677

(1) This section applies if—

(a) an estate is a foreign estate in relation to a tax year,

(b) United Kingdom income tax has been charged on a person for the tax year on estate income treated as arising from the estate under section 652 (estate income: absolute interests in residue), and

(2) If the person makes a claim under this section, the income tax charged on the person on that estate income is to be reduced by an amount equal to—

$$T×AB$where—T is the income tax charged on the person,A is so much of the aggregate income of the estate as has already borne United Kingdom income tax for the tax year, andB is the aggregate income of the estate for the tax year.$

(3) The tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.

Relief where UK income tax borne by foreign estate: limited and discretionary interests

678

(1) This section applies if—

(a) an estate is a foreign estate in relation to a tax year,

(b) United Kingdom income tax has been charged on a person for the tax year on estate income from the estate treated as arising under—

(i) section 654 (estate income: limited interests in residue), or

(ii) section 655 (estate income: discretionary interests in residue), and

(2) If the person makes a claim under this section, the income tax charged on the person on that estate income is to be reduced by an amount equal to—

$$T×A-CB-C$where—T is the income tax charged on the person,A is so much of the aggregate income of the estate as has already borne United Kingdom income tax for the tax year,B is the aggregate income of the estate for the tax year, andC is the amount of United Kingdom income tax already borne by the aggregate income of the estate for the tax year.$

(3) The tax reduction under this section is given effect at Step 6 of the calculation in section 23 of ITA 2007.

General

Income from which basic amounts are treated as paid

679

(1) The part of the aggregate income of the estate from which a basic amount is treated as paid is determined by applying assumptions A and B in that order.

(2) Assumption A is that if there are different persons with interests in the residue of the estate, payments in respect of their basic amounts are paid out of the different parts of the aggregate income of the estate in such proportions as are just and reasonable for their different interests.

(3) Assumption B is that payments are made from those parts in descending order, starting with the income bearing income tax at the highest rate and ending with the income bearing income tax at the lowest rate (subject to subsection (3A)).

(3A) For the purposes of assumption B, where those parts include—

(a) income bearing income tax at 0% by virtue of section 680(1A), and

(b) other income bearing income tax at 0%,

payments are to be made from income within paragraph (a) after income within paragraph (b).

(4) If some, but not all, of the aggregate income of the estate is income within section 680, assumption C is applied before assumptions A and B.

(5) Assumption C is that the basic amount is paid from income that is not within section 680 before it is paid from income within that section.

(6) Assumptions A and B then apply—

(a) first to determine the part of the income not within that section from which the basic amount is paid, and

(b) then to determine the part of the income within that section from which the basic amount is paid.

Income treated as bearing income tax

680

(1) This section has effect for the purposes of—

section 663 (the applicable rate for grossing up basic amounts of estate income),

section 670 (applicable rate for determining assumed income entitlement (UK estates)), ...

section 679 (income from which basic amounts are treated as paid) , and

section 679A (income from which sums within section 668(1)(b) are treated as paid).

(1A) If, in the case of a UK estate, the aggregate income of the estate for a tax year is equal to or less than the de minimis estates amount (within the meaning of section 24B of ITA 2007), the aggregate income of the estate for that tax year is treated as bearing income tax at 0%.

(2) If—

(a) subsection (1A) does not apply to treat the aggregate income of the estate for a tax year as bearing income tax at 0%, and

(b) the aggregate income of the estate for that tax year includes a sum within subsection (2A) or (4),

the sum is treated as bearing income tax at the rate specified for it in that subsection.

(2A) A sum that is part of the aggregate income of the estate because of falling within section 664(2)(c) (stock dividends) or (d) (release of loans to participator in close company: loans and advances to persons who die) is treated as bearing income tax at 0%.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) A sum that is part of the aggregate income of the estate because of falling within section 664(2)(e) (gains from life insurance contracts etc.) is treated as bearing income tax at the basic rate.

(5) Income tax treated as borne under section 656(3) or 657(4) (gross amount of estate income treated as bearing tax at the applicable rate) is not repayable so far as the basic amount of the estate income in question is paid from sums within this section or from aggregate income treated as bearing income tax at 0% by virtue of subsection (1A).

Transfers of assets etc. treated as payments

681

(1) For the purposes of this Chapter—

(a) a transfer of assets, or

(b) the appropriation of assets by personal representatives to themselves,

is treated as the payment of an amount equal to the assets' value at the date of transfer or appropriation.

(2) The set off or release of a debt is treated for the purposes of this Chapter as the payment of an amount equal to it.

(3) If at the end of the administration period—

(a) there is an obligation to transfer assets to any person, or

(b) personal representatives are entitled to appropriate assets to themselves,

an amount equal to the assets' value at that time is treated as payable then for the purposes of this Chapter.

(4) If at the end of the administration period—

(a) there is an obligation to release or set off a debt owed by any person, or

(b) personal representatives are entitled to release or set off a debt in their own favour,

a sum equal to the debt is treated as payable then for the purposes of this Chapter.

Assessments, adjustments and claims after the administration period

682

(1) This subsection applies if after the administration period ends it is apparent that a person is liable for income tax on estate income for any tax year who previously appeared not to be so liable or to be liable for tax on a lesser amount.

(2) If subsection (1) applies—

(a) the person may be assessed and taxed for the tax year, and

(b) any relief or additional relief to which the person may be entitled for the tax year is to be allowed if a claim is made.

(3) This subsection applies if after the administration period ends it is apparent that a person who previously appeared to be liable for income tax on estate income for any tax year is not so liable or is liable for tax on a lesser amount.

(4) If subsection (3) applies—

(a) all necessary adjustments and repayments of income tax for the tax year are to be made, and

(b) if the person has been allowed relief which exceeds the relief that could have been given by reference to the amount actually charged for the tax year, income tax is charged on the person for that year under this subsection on the excess.

(4A) The excess charged under subsection (4)(b) is treated as an amount of income for income tax purposes, except so far as it represents a tax reduction given effect at Step 6 of the calculation in section 23 of ITA 2007.

(5) An assessment or adjustment made for the purposes of this Chapter or a claim made as a result of this Chapter may be made after the end of the period otherwise allowed if it is made on or before the third anniversary of the normal self-assessment filing date for the tax year in which the administration period ends.

Chapter 7 — Annual payments not otherwise charged

Charge to tax on annual payments not otherwise charged

683

(1) Income tax is charged under this Chapter on annual payments that are not charged to income tax under or as a result of any other provision of this Act or any other Act.

(2) Subsection (1) does not apply to annual payments that would be charged to income tax under or as a result of another provision but for an exemption.

(3) The frequency with which payments are made is ignored in determining whether they are annual payments for the purposes of this Chapter.

(4) For exemptions, see in particular—

(a) sections 727 to 730 (certain annual payments by individuals),

(b) section 731 (periodical payments of personal injury damages),

(d) section 734 (payments from trusts for injured persons),

(e) sections 735 to 743 (health and employment insurance payments),

(f) sections 744 to 747 (payments to adopters),

(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(i) section 776 (scholarship income).

Income charged

684

(1) Tax is charged under this Chapter on the full amount of the annual payments arising in the tax year.

(2) Subsection (1) is subject to Part 8 (foreign income: special rules).

(3) The amount charged under this Chapter in the case of certain payments made by trustees in the exercise of a discretion is subject to section 494 of ITA 2007(grossing up of discretionary payments from trusts).

Person liable

685

The person liable for any tax charged under this Chapter is the person receiving or entitled to the annual payments.

Payments received after deduction of tax

686

(1) In accordance with section 848 of ITA 2007, a sum representing income tax deducted under Chapter 6 of Part 15 of that Act from an annual payment within this Chapter is treated as income tax paid by the recipient . . .

(2) See also section 494(3) of ITA 2007(sum treated as deducted from payments made under a discretionary trust treated as income tax paid by the person to whom the payment is made or the settlor).

Chapter 8 — Income not otherwise charged

Charge to tax on income not otherwise charged

687

(1) Income tax is charged under this Chapter on income from any source that is not charged to income tax under or as a result of any other provision of this Act or any other Act.

(2) Subsection (1) does not apply to annual payments or to income falling within Chapter 2A of Part 4.

(3) Subsection (1) does not apply to income that would be charged to income tax under or as a result of another provision but for an exemption.

(4) The definition of “income” in section 878(1) does not apply for the purposes of this section.

(5) For exemptions from the charge under this Chapter, see in particular—

section 768 (commercial occupation of woodlands), and

section 779 (gains on commodity and financial futures).

Income charged

688

(1) Tax is charged under this Chapter on the ... amount of the income arising in the tax year.

(2) Subsection (1) is subject to—

(za) Chapter 1 of Part 6A (which gives relief on relevant income which may consist of or include income chargeable under this Chapter: see, in particular, sections 783AB, 783AC, 783AG and 783AJ),

(a) Chapter 1 of Part 7 (which provides relief on income from the use of furnished accommodation in an individual's only or main residence: see, in particular, sections 794 and 798),

(b) Chapter 2 of that Part (which provides relief on income from the provision by an individual of qualifying care: see, in particular, sections 814 and 817), and

Person liable

689

The person liable for any tax charged under this Chapter is the person receiving or entitled to the income.

Part 6 — Exempt income

Chapter 1 — Introduction

Overview of Part 6

690

(1) This Part provides for certain exemptions from charges to income tax under this Act.

(2) The exemptions are dealt with in—

(a) Chapter 2 (national savings income),

(b) Chapter 3 (income from individual investment plans),

(d) Chapter 5 (venture capital trust dividends),

(e) Chapter 6 (income from FOTRA securities),

(f) Chapter 7 (purchased life annuity payments),

(g) Chapter 8 (other annual payments), and

(h) Chapter 9 (other income).

(3) Chapter 10 explains that, in general, the effect of the exemptions is that the exempt amounts are ignored for other income tax purposes.

(4) Other exemptions, such as exemptions relating to particular categories of persons, may also be relevant to the charges to income tax under this Act.

(5) And the exemptions dealt with in this Part may themselves be relevant to charges to income tax outside this Act.

Chapter 2 — National savings income

National Savings Bank ordinary account interest

691

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income from savings certificates

692

(1) No liability to income tax arises in respect of income from authorised savings certificates.

(2) A savings certificate is authorised so far as its acquisition was not prohibited by regulations made by the Treasury limiting a person's holding.

(3) In this section “savings certificates” means—

(a) savings certificates issued under—

(i) section 12 of the National Loans Act 1968 (c. 13) (power of Treasury to borrow),

(ii) section 7 of the National Debt Act 1958 (c. 6) (power of Treasury to issue national savings certificates), or

(iii) section 59 of FA 1920 (power to borrow on national savings certificates),

(b) war savings certificates, as defined in section 9(3) of the National Debt Act 1972 (c. 65), or

(c) savings certificates issued under any enactment forming part of the law of Northern Ireland and corresponding to section 12 of the National Loans Act 1968.

(4) But subsection (3)(c) does not include Ulster Savings Certificates (for which there are special rules in section 693).

Income from Ulster Savings Certificates

693

(1) No liability to income tax arises in respect of income from authorised Ulster Savings Certificates if condition A, B or C is met.

(2) Condition A is that —

(a) the holder purchased them, and

(b) at the time of the purchase the holder was resident and ordinarily resident in Northern Ireland.

(3) Condition B is that the holder is so resident and ordinarily resident when they are repaid.

(4) Condition C is that—

(a) they are repaid after the holder's death, and

(b) at the time of the purchase the holder was so resident and ordinarily resident.

(5) An Ulster Savings Certificate is authorised so far as its acquisition was not prohibited by regulations made by the Department of Finance and Personnel limiting a person's holding.

(6) The exemption under this section requires a claim.

(7) In this Act “Ulster Savings Certificates” means savings certificates issued or treated as issued under section 15 of the Exchequer and Financial Provisions Act (Northern Ireland) 1950 (c. 3 (N.I.)).

Chapter 3 — Income from individual investment plans

Income from individual investment plans

694

(1) The Treasury may by regulations provide that income of an individual from investments under a plan—

(a) is exempt from income tax, or

(b) is exempt from income tax to such extent as is specified in the regulations.

(1A) In subsection (1) “income of an individual from investments under a plan” includes income from investments which is treated as the individual's income by virtue of section 629 (income paid to relevant children of settlor).

(2) In this Chapter such regulations are referred to as “investment plan regulations”.

(3) Investment plan regulations may, in particular, specify—

(a) the description of individuals who may invest, and

(b) maximum investment limits.

(4) They may provide for investment by an individual under more than one plan in the same tax year.

(5) They must set out conditions subject to which plans are to operate.

(6) The following provisions of this Chapter contain more particular provisions about the scope of investment plan regulations.

Investment plans

695

(1) Investment plan regulations may specify the kind of investments which may be made under a plan or which may be made by particular descriptions of individuals under a plan.

(2) They may—

(a) provide for a plan in the form of an account, and

(b) authorise the ways in which the subscriptions to an account are to be invested.

(3) They may—

(a) provide that plans are to be such as are approved by the the Commissioners for Her Majesty’s Revenue and Customs, and

(b) specify the circumstances in which approval may be granted and withdrawn.

(4) They may—

(a) provide for plans to be treated as being of different kinds, according to criteria set out in the regulations,

(b) provide for the Commissioners to register a plan as being of a particular kind, and

Plan managers

696

(1) Investment plan regulations may provide that investments are to be held by persons on behalf of investors.

(2) In this Chapter those persons, including the managers of any such account as is specified in section 695(2), are referred to as “plan managers”, and references to “plan managers” in any other enactment are to be read accordingly.

(3) Investment plan regulations may—

(a) provide that plan managers are to be such as are approved by the Commissioners for Her Majesty’s Revenue and Customs , and

(b) specify the circumstances in which approval may be granted and withdrawn.

Special requirements for certain foreign managers

697

(1) Investment plan regulations may provide that a foreign institution may only be a plan manager if one of the requirements set out in section 698(2), (3) and (4) about the discharge of such of the institution's duties as are specified in the regulations is met.

(2) In this section “foreign institution” means—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(3) Different duties may be specified under subsection (1) for different institutions or different descriptions of institution.

(4) In this section—

“insurance company” means an undertaking carrying on the business of effecting or carrying out contracts of insurance, and

“contract of insurance” has the meaning given by Article 3(1) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544).

Requirements for discharge of foreign institution’s duties

698

(1) The requirements about the discharge of an institution's duties which are referred to in section 697(1) (one of which may be imposed in the case of certain foreign managers) are requirements A, B and C.

(2) Requirement A is that—

(a) a person is currently appointed by the institution to be responsible for securing the discharge of the duties,

(b) that person either—

(i) is an individual who is a UK resident, or

(ii) is not an individual and has a business establishment in the United Kingdom, and

(c) the institution has notified the Commissioners for Her Majesty’s Revenue and Customs of that person's identity and appointment.

(3) Requirement B is that there are other current arrangements with the Commissioners for a person other than the institution to secure the discharge of the duties.

(4) Requirement C is that there are other current arrangements with the Commissioners designed to secure the discharge of the duties.

(5) Investment plan regulations may provide—

(a) that requirement A or B is only met if the person concerned is of a description specified in the regulations as respects that requirement,

(b) that appointments made for the purposes of requirement A or arrangements made for the purposes of requirement B are treated as terminated in circumstances specified in the regulations as respects that requirement.

(6) Investment plan regulations may provide that a person currently appointed as mentioned in subsection (2) or as to whom there is a current arrangement within subsection (3)—

(a) may act on the institution's behalf for any of the purposes of the provisions relating to the duties,

(b) is to secure the institution's compliance with, and discharge of, the duties, where appropriate by acting on its behalf,

(c) is personally liable for the institution's failure to comply with or discharge any of the duties, as if they were imposed on the person and the institution jointly and severally.

Non-entitlement to exemption

699

(1) Investment plan regulations may—

(a) provide that in circumstances specified in the regulations an investor ceases to be entitled to the exemption given by regulations made under section 694(1) and is treated as not having been entitled to it,

(b) adapt or modify the effect of any enactment relating to income tax for that purpose, and

(c) provide that in those circumstances the investor or the plan manager (depending on the terms of the regulations) is to account to the Commissioners for Her Majesty’s Revenue and Customs for income tax from which exemption has already been given on the basis that the investor was entitled to the exemption.

(2) They may provide that an investor or the plan manager (depending on the terms of the regulations) is to account to the Commissioners—

(a) for income tax from which the exemption has been given in circumstances where the investor was not entitled to it, or

(b) for an amount determined in accordance with the regulations to be the amount to be taken as representing that tax.

(3) They may modify the effect of or adapt any enactment relating to income tax for the purposes of securing that investors or plan managers account for the tax and other amounts mentioned in subsections (1) and (2).

(4) They may also modify the provisions of or adapt Chapter 9 of Part 4 of this Act (gains from contracts for life insurance etc.) or Chapter 2 of Part 13 of ICTA (life policies, life annuities and capital redemption policies) for cases where an investor—

(a) ceases to be entitled to the exemption given by regulations made under section 694(1) and is treated as not having been entitled to it, or

(b) has been given the exemption on the basis of an entitlement to it when there was no such entitlement.

(5) They may provide for plan managers (as well as investors) to be liable to account for amounts becoming due from investors as a result of regulations made under subsection (4).

(6) They may provide that, instead of having to account as mentioned in subsection (2) or (5), an investor or a plan manager is liable to a penalty of an amount specified in the regulations if—

(a) an exemption has been given to which there was no entitlement, and

(b) the circumstances are such as are specified in the regulations.

(7) They may provide that liabilities are imposed in cases which—

(a) are not cases in which liabilities may be imposed under subsections (1) to (6) where relief has been given to which there was no entitlement, but

(b) are cases where—

(i) a contravention or failure to comply with investment plan regulations that is specified in the regulations, or

(ii) the existence of such other circumstances as are so specified,

would have the effect of excluding or limiting an entitlement to exemption, apart from the regulations under this subsection.

(8) Regulations under subsection (7)—

(a) may only provide for the imposition of liabilities equivalent to those which may be imposed under subsections (1) to (6), and

(b) must provide for those liabilities to replace the liabilities to tax which would otherwise arise.

(9) In this section references to an investor include an individual entitled to an exemption given by investment plan regulations by virtue of section 694(1A).

Information

700

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

General and supplementary powers

701

(1) Investment plan regulations may make provision generally for the purpose of—

(a) the establishment and administration of plans, and

(b) the administration of income tax in relation to them.

(2) They may adapt or modify the effect of any enactment relating to income tax for the purpose of securing that investors are entitled to exemption from income tax in respect of investments.

(3) They may specify how exemption from tax is to be claimed by, and granted to, investors or plan managers on behalf of investors.

(4) They may include provision having effect in relation to times before they are made if the provision does not impose or increase any liability to tax.

(5) They may make different provision for different cases or circumstances.

(6) In this section references to an investor include an individual entitled to an exemption given by investment plan regulations by virtue of section 694(1A).

Chapter 4 — SAYE interest

Interest under certified SAYE savings arrangements

702

(1) No liability to income tax arises in respect of interest payable under a certified SAYE savings arrangement.

(2) In this section “certified SAYE savings arrangement” has the meaning given in section 703(1).

(3) Subsection (1) is subject to—

(a) section 707(1) (which requires the providers of certain arrangements to be authorised), and

(b) paragraph 7 of Schedule 12 to FA 1988 (application of exemption on change of status of building society).

(4) In this Chapter “interest” includes any bonus.

Meaning of “certified SAYE savings arrangement”

703

(1) In this Chapter “certified SAYE savings arrangement” means a linked savings arrangement which is certified under section 705.

(2) In this Chapter “linked savings arrangement” means an arrangement—

(a) which is of a kind specified in section 704(1), and

(b) under which an individual who is eligible to participate in a Schedule 3 SAYE option scheme enters into a contract to make periodical contributions for a specified period for the purpose of being able to participate in that scheme.

(3) In subsection (2)—

“to participate” means to obtain and exercise rights under the scheme, and

“Schedule 3 SAYE option scheme” has the meaning given in Schedule 3 to ITEPA 2003.

Types of arrangements and providers

704

(1) A linked savings arrangement may be—

(a) a national savings arrangement, or

(b) an institutional arrangement.

(2) In this Chapter “national savings arrangement” means an arrangement which—

(a) provides for contributions to be paid to raise money under section 12 of the National Loans Act 1968 (c. 13) (power of Treasury to borrow),

(b) is governed by regulations made under section 11 of the National Debt Act 1972 (c. 65) (power of Treasury to make regulations as to raising of money under auspices of Director of Savings), and

(3) In this Chapter “institutional arrangement” means—

(a) a bank arrangement, or

(b) a building society arrangement ...

(4) In this Chapter—

(a) “bank arrangement” means an arrangement which provides for contributions to be paid to a person within section 991(2)(b) of ITA 2007 (banks), and

(b) “provider”, in relation to such an arrangement, means that person.

(5) In this Chapter—

(a) “building society arrangement” means an arrangement which provides for contributions to be paid by way of investment in shares in a building society, and

(b) “provider”, in relation to such an arrangement, means that society.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Certification of arrangements

705

(1) A linked savings arrangement is certified under this section if it is certified by the Commissioners —

(a) as a linked savings arrangement, and

(b) in the case of an institutional arrangement, as meeting such requirements as the Treasury may specify for the purposes of this Chapter.

(2) The requirements which may be specified under subsection (1)(b) are such requirements as the Commissioners consider appropriate.

(3) They may, in particular, relate to—

(a) the descriptions of individuals who may enter into contracts under an arrangement,

(b) the contributions to be paid by them, and

(4) Different requirements may be specified for—

(a) bank arrangements,

(b) building society arrangements, and

(5) In this Chapter “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.

Withdrawal and variation of certifications and connected requirements

706

(1) The Commissioners may—

(a) withdraw the requirements specified under section 705(1)(b) for any description of arrangements and any certification made by reference to those requirements, or

(b) vary those requirements and withdraw any certification made by reference to them.

(2) The withdrawal, or variation and withdrawal, is only effective if the Commissioners —

(a) specify the date on which it is to take effect, and

(b) give notice of it ... at least 15 days before that date to the provider authorised under section 707 to enter into contracts under the arrangement concerned.

(3) The withdrawal, or variation and withdrawal, does not affect

(a) the operation of the arrangement concerned before that date,

(b) contracts made under that arrangement before that date, or

(c) where the notice so provides, contracts which are of a description specified in the notice and are made under that arrangement after that date.

Authorisation of providers

707

(1) In the case of an institutional arrangement, section 702(1) (exemption of interest payable under certified SAYE savings arrangements) only applies if, at the time the contract under the arrangement is made, the provider is authorised by the Commissioners to enter into contracts under it.

(2) If the authorisation is conditional, the conditions must be met at that time.

(3) Authorisation may be given for arrangements generally or a particular arrangement.

(4) More than one authorisation may be given to the same provider.

Withdrawal and variation of authorisations

708

(1) The Commissioners may withdraw the authorisation of a provider or vary it by imposing, varying or removing conditions.

(2) The withdrawal or variation is only effective if the Commissioners —

(a) specify the date on which it is to take effect, and

(b) except in the case of a variation removing all conditions, give notice of it ... to the provider at least 28 days before that date.

(3) The withdrawal or variation does not affect contracts made before that date.

(4) The fact that a provider has had its authorisation withdrawn or varied does not affect the later exercise by the Commissioners of their powers under section 707 or this section as respects the provider.

Chapter 5 — Venture capital trust dividends

Venture capital trust dividends

709

(1) No liability to income tax arises in respect of a venture capital trust dividend if—

(a) conditions A and B are met, and

(b) where the dividend is paid in respect of shares acquired after 8th March 1999, condition C is met.

(2) In subsection (1) a “venture capital trust dividend” means a dividend paid in respect of ordinary shares in a company which—

(a) is a venture capital trust—

(i) at the end of the accounting period in which the profits or gains in respect of which it is paid arose or accrued, and

(ii) when the dividend is paid, and

(b) was such a trust when the person to whom it is paid acquired the shares.

(3) Condition A is that the person beneficially entitled to the dividend—

(a) is an individual of at least 18 years, and

(b) is beneficially entitled to it as the holder of the shares or as the person for whom, or for whose benefit, they are held by a nominee.

(4) Condition B is that—

(a) in the tax year in which the shares were acquired the market value of all the shares acquired by the individual or any nominee of the individual in companies which were venture capital trusts at the time of acquisition did not exceed £200,000, or

(b) in that year that market value exceeded £200,000, but the shares are treated under section 710 as having been acquired within that limit.

(5) For the purposes of subsection (4), the market value of a share is determined as at the time of its acquisition.

(6) Condition C is that the shares were acquired for genuine commercial reasons and not as part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, was the avoidance of tax.

(7) Shares that were not so acquired are ignored for the purposes of subsection (4) and section 710 (whether or not they were acquired after 8th March 1999).

(8) In this section and in sections 710 and 711—

“market value” has the same meaning as in TCGA 1992 (see sections 272 and 273),

“nominee”, in relation to an individual, includes the trustees of a bare trust of which the individual is the only beneficiary, and

“ordinary shares” means shares forming part of the company's ordinary share capital.

Treatment of shares where annual acquisition limit exceeded

710

(1) This section sets out the rules for determining which shares whose market value is relevant for the limit in section 709(4) are treated as shares acquired within that limit (“exempt shares”) where that limit is exceeded in a tax year.

(2) Shares are treated as exempt shares so far as their acquisition does not cause the limit to be exceeded at the time they are acquired.

(3) Subsection (2) is subject to subsection (4).

(4) If shares of different descriptions acquired on the same day cause the limit to be exceeded on that day, shares of each description are treated as exempt shares so far as their market value does not exceed the appropriate proportion of the available value.

(5) In subsection (4)—

“the appropriate proportion”, in relation to shares of a particular description, means the proportion which their market value bears to the market value of all the shares acquired on that day, and

“available value” means the maximum value of shares which could be acquired on that day without exceeding the limit.

Identification of shares after disposals

711

(1) In determining whether a disposal relates to shares in a company which were acquired when it was a venture capital trust or others, it is assumed that the others are disposed of first.

(2) In determining whether a disposal of shares in a company which were acquired when it was a venture capital trust relates to shares which meet the condition in section 709(4) (annual acquisition limit) or others (“excess shares”), assumptions A and B are to be made.

(3) Assumption A is that shares acquired on an earlier day are disposed of before those acquired on a later day.

(4) Assumption B is that where the shares were acquired on the same day, excess shares are disposed of first.

(5) For the purposes of this section, acquisitions and disposals by an individual's nominee are treated as made by the individual, and acquisitions and disposals between them are ignored.

Identification of shares after reorganisations etc.

712

(1) This section applies if shares (“the new shares”) are treated under Chapter 2 of Part 4 of TCGA 1992 (reorganisations etc.) as the same assets as other shares (“the old shares”).

(2) If all the old shares met—

(a) the condition in section 709(4) (annual acquisition limit), and

(b) if it applied to the old shares, the condition in section 709(6) (acquisition for genuine commercial reasons),

the new shares are treated as doing so.

(3) If only some of the old shares met those conditions, the corresponding proportion of the new shares are treated as meeting them and the remainder are treated as not doing so.

(4) In the tax year in which the new shares are acquired the value of the new shares is ignored in determining whether other shares acquired in the same tax year meet the condition in section 709(4).

Chapter 6 — Income from FOTRA securities

Introduction: securities free of tax to residents abroad (“FOTRA securities”)

713

(1) This Chapter provides for exemptions from income tax in respect of FOTRA securities.

(2) In this Chapter “FOTRA security” means—

(a) a security issued with a condition about exemption from taxation authorised by section 22 of F(No.2)A 1931,

(b) a gilt-edged security which was issued before 6th April 1998 and without any such condition (other than 3½% War Loan 1952 Or After), or

(3) In this Chapter “the exemption condition” has the meaning given by subsections (4) to (6), according to the kind of FOTRA security involved.

(4) In relation to a security within subsection (2)(a), it means the condition authorised by section 22 of F(No.2)A 1931.

(5) In relation to a security within subsection (2)(b), it means a condition with which 7.25% Treasury Stock 2007 was first issued, being a condition treated by section 161(1) of FA 1998 (non-FOTRA securities)—

(a) as a condition with which the security within subsection (2)(b) was issued, and

(b) as a condition authorised in relation to its issue by section 22 of F(No.2)A 1931.

(6) In relation to 3½% War Loan 1952 Or After, it means a condition of its issue authorised by section 47 of F(No.2)A 1915.

Exemption of profits from FOTRA securities

714

(1) No liability to income tax arises in respect of profits from a FOTRA security if conditions A and B are met.

(2) Subsection (1) is subject to subsection (5).

(3) Condition A is that the profits are stated in the exemption condition to be exempt from income tax.

(4) Condition B is that any requirements for obtaining the exemption imposed by the security's conditions of issue are met.

(5) Whatever the exemption condition provides, amounts charged under the provisions specified in subsection (6) are not exempted by subsection (1).

(6) The provisions are—

Chapter 5 of Part 5 (settlements: amounts treated as income of settlor) so far as it applies to income within section 619(1)(a) or (b), and

Chapter 2 of Part 13 of ITA 2007(anti-avoidance provisions: transfer of assets abroad).

(7) This section does not affect the need to claim repayment of tax within the time limit applicable for a claim.

Interest from FOTRA securities held on trust

715

(1) This section applies if—

(a) a FOTRA security is held on trust, and

(b) apart from this section, interest payable on the security would not be exempt from income tax under section 714 because of the security not being in the beneficial ownership of a non-UK resident person.

(2) For the purposes of determining whether the interest is exempt under section 714 it is to be assumed that the security is in the beneficial ownership of a non-UK resident person if none of the beneficiaries of the trust is UK resident for the tax year in which the interest arises.

(3) In subsection (2) “beneficiaries of the trust” includes any person known to the trustees as a person—

(a) who is, or will or may become, entitled under the terms of the trust to receive income under the trust, or

(b) to whom or for whose benefit such income may be paid or applied.

(4) In subsection (3) “income under the trust” includes any property held on the terms of the trust and falling to be treated as capital so far as it is or represents amounts received by the trustees as income.

Restriction on deductions etc. relating to FOTRA securities

716

(1) A person who meets conditions A and B may not bring into account for income tax purposes—

(a) any amount relating to changes in the value of a FOTRA security, or

(b) expenses related to holding it or to any transaction concerning it.

(2) Condition A is that the person is the beneficial owner of the security.

(3) Condition B is that the person is a person who would be exempt from tax on the security under this Chapter.

Chapter 7 — Purchased life annuity payments

Partial exemption for purchased life annuity payments

Exemption for part of purchased life annuity payments

717

(1) No liability to income tax arises under Chapter 7 of Part 4 in respect of so much of an annuity payment made under a purchased life annuity as is within this subsection in accordance with section 719 (extent of exemption).

(2) Subsection (1) is subject to section 718.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) In this Chapter “purchased life annuity” has the same meaning as in Chapter 7 of Part 4 (see section 423).

Excluded annuities

718

(1) The exemption in section 717(1) does not apply to payments made under the annuities specified in subsection (2).

(2) The annuities are—

(a) an annuity the whole or part of the consideration for which consisted of sums satisfying the conditions for relief under section 266 of ICTA (life assurance premiums),

(b) an annuity purchased following a direction in a will, and

(c) an annuity purchased to provide for an annuity payable as a result of a will or settlement out of income of property disposed of by the will or settlement.

(3) For the purposes of subsection (2)(c), it does not matter whether or not capital could also be used to pay the annuity.

Extent of exemption under section 717

719

(1) This section sets out the rules for determining the extent to which an annuity payment is within the exemption in section 717(1).

(2) The rules depend on—

(a) whether or not the amount of the annuity payments under the annuity depends solely on the duration of a human life or lives (see subsections (3) to (5)), and

(b) whether or not the annuity's term depends solely on the duration of a human life or lives (see subsections (6) to (8)).

(3) If the amount of the annuity payments depends solely on the duration of a human life or lives, the same proportion of each payment (“the exempt proportion”) is exempt.

(4) But if the amount of the annuity payments also depends on another contingency, each payment is exempt so far as it does not exceed a fixed sum (“the exempt sum”).

(5) If an annuity payment within subsection (4) is less than the exempt sum, the shortfall is added to the exempt sum for the next payment (and so on).

(6) The ways to determine the exempt proportion and the exempt sum differ according to whether or not the annuity's term depends solely on the duration of a human life or lives.

(7) If the annuity's term depends solely on the duration of a human life or lives—

(a) the exempt proportion is determined as set out in section 720, and

(b) the exempt sum is determined as set out in section 721.

(8) If the annuity's term also depends on another contingency—

(a) the exempt proportion is the proportion which is just and reasonable, having regard to the contingencies affecting the annuity and to section 720, and

(b) the exempt sum is the amount which is just and reasonable, having regard to the contingencies affecting the annuity and to section 721.

Exempt proportion: term dependent solely on duration of life

720

(1) In the case of an annuity within section 719(7) (term dependent solely on duration of life), the exempt proportion is —

$$AP×PPAV$where—AP is the annuity payment,PP is the purchase price of the annuity, andAV is the actuarial value of the annuity payments.$

(2) The purchase price of the annuity is the total amount or value of the consideration given for the annuity.

(3) The actuarial value of the annuity payments is their value at the date when the first of the payments starts to accrue.

(4) That value is determined—

(a) by reference to tables of mortality prescribed under section 724,

(b) taking the age at that date of a person during whose life the annuity is payable as that person's age in whole years on that date, and

(5) But if it is not possible to determine that actuarial value by reference to the tables mentioned in subsection (4)(a), it is such amount as may be certified by the Government Actuary or the Deputy Government Actuary.

Exempt sum: term dependent solely on duration of life

721

(1) In the case of an annuity within section 719(7) (term dependent solely on duration of life), the exempt sum is —

$$PP×1TY×PM12$where—PP is the purchase price of the annuity,TY is the expected term of the annuity in years (and any odd fraction of a year), andPM is the period in months (and any odd fraction of a month) in respect of which the annuity payment is made.$

(2) The purchase price of the annuity is the total amount or value of the consideration given for the annuity.

(3) The expected term of the annuity is the period from the date when the first annuity payment starts to accrue to the date when it is expected that the last payment will become payable.

(4) The expected term of the annuity is determined—

(a) as at the date when the first annuity payment starts to accrue,

(b) by reference to tables of mortality prescribed under section 724, and

(c) taking the age at that date of a person during whose life the annuity is payable as that person's age in whole years on that date.

(5) But if it is not possible to determine that term by reference to the tables mentioned in subsection (4)(b), it is such period as may be certified by the Government Actuary or the Deputy Government Actuary.

Consideration for the grant of annuities

722

(1) This section applies if the amount or value given for an annuity is to be determined for the purposes of sections 720(2) or 721(2) and either—

(a) consideration is not given solely for the annuity, or

(b) it appears that the amount or value of the consideration nominally given for it affected, or was affected by, the consideration given for something else.

(2) For the purposes of subsection (1), consideration given for a right to a return of premiums or of other consideration for an annuity is treated as given solely for the annuity.

(3) If subsection (1)(a) applies, the consideration is to be apportioned in such way as is just and reasonable.

(4) If subsection (1)(b) applies, the total amount or value of the considerations given is to be apportioned in such way as is just and reasonable.

Determinations

723

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Regulations

724

(1) the Commissioners for Her Majesty’s Revenue and Customs may by regulations—

(a) prescribe the procedure to be used in giving effect to sections 717 to 722 and this section where no provision is made in those provisions,

(b) apply any provision of the Income Tax Acts, with or without modifications, for the purposes of those provisions or the regulations,

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Immediate needs annuities

Annual payments under immediate needs annuities

725

(1) No liability to income tax arises under Chapter 7 of Part 4 in respect of so much of an annual payment made under an immediate needs annuity as is made—

(a) for the benefit of the person protected under that annuity, and

(b) to a care provider or a local authority in respect of the provision of care for that person.

(2) In this section “immediate needs annuity” means a contract for a purchased life annuity—

(a) the purpose or one of the purposes of which is to protect a person against the consequences of the person being unable, at the time the contract is made, to live independently without assistance because of a condition to which subsection (3) applies, and

(b) under which benefits are payable in respect of the provision of care for the person protected.

(3) This subsection applies to—

(a) mental or physical impairment, or

(b) injury, sickness or other infirmity,

which is expected to be permanent.

(4) In this section and section 726 “care” means accommodation, goods or services which it is necessary or desirable to provide to a person because of a condition to which subsection (3) applies.

(5) In this section—

“care provider” has the meaning given in section 726, and

“purchased life annuity” has the same meaning as in Chapter 7 of Part 4 (see section 423).

(6) The Treasury may by order amend—

(a) subsection (2), and

(b) subsection (3), so far as it applies for the purposes of subsection (2).

Meaning of “care provider”

726

(1) In section 725 “care provider” means a person who—

(a) carries on a trade, profession or vocation which consists of or includes the provision of care, and

(b) meets the care registration requirement.

(2) A person meets the care registration requirement in relation to care provided in England if the person is registered under Part 2 of the Care Standards Act 2000 or Chapter 2 of Part 1 of the Health and Social Care Act 2008 in respect of the provision of care.

(2A) A person meets the care registration requirement in relation to care provided in Wales if the person is registered under—

(a) Part 2 of the Care Standards Act 2000, or

(b) Part 1 of the Regulation and Inspection of Social Care (Wales) Act 2016 (anaw 2),

in respect of the provision of the care.

(3) A person meets the care registration requirement in relation to care provided in Scotland if the person provides care as, or as part of, a service which is registered under—

(a) Chapter3 of Part 5 of the Public Services Reform (Scotland) Act 2010 (asp 8), or

(b) section 10Q of the National Health Service (Scotland) Act 1978 (c. 29).

(4) A person meets the care registration requirement in relation to care provided in Northern Ireland if the person is registered in respect of the provision of care under—

(a) Part 2 or 3 of the Registered Homes (Northern Ireland) Order 1992 (S.I. 1992/3204 (N.I. 20)), or

(b) Part 3 of the Health and Personal Social Services (Quality, Improvement and Regulation) (Northern Ireland) Order 2003 (S.I. 2003/431 (N.I. 9)).

(5) A person meets the care registration requirement in relation to care provided in a territory outside the United Kingdom if the person meets requirements under the law of that territory relating to the provision of care that are comparable to those mentioned in subsections (2) to (4).

(6) The Treasury may by order amend this section.

Chapter 8 — Other annual payments

Certain annual payments by individuals

727

(1) No liability to income tax arises under Part 5 in respect of an annual payment if it—

(a) is made by an individual, and

(b) arises in the United Kingdom.

(2) Subsection (1) is subject to—

section 728 (commercial payments), and

section 729 (payments for non-taxable consideration).

(3) Subsection (1) also applies to a payment made by an individual's personal representatives if—

(a) the individual would have been liable to make it, and

(b) that subsection would have applied if the individual had made it.

(4) For the purposes of subsection (1) and section 728, “individual” includes a Scottish partnership if at least one partner is an individual.

Commercial payments

728

A payment by an individual is not exempt from income tax under section 727(1) if it is made for commercial reasons in connection with the individual's trade, profession or vocation.

Payments for non-taxable consideration

729

(1) A payment that meets condition A is only exempt from income tax under section 727(1) if condition B or C is met.

(2) Condition A is that—

(a) the payment is made under a liability incurred at any time for consideration in money or money's worth, and

(b) some or all of the consideration is not required to be brought into account in calculating the payer's income for income tax purposes.

(3) Condition B is that the payment is income within section 627(1) (payments on dissolution or separation) in the recipient's hands.

(4) Condition C is that the payment is made to an individual under a liability incurred at any time in consideration of the individual surrendering, assigning or releasing an interest in settled property to or in favour of a person with a subsequent interest.

(5) In the application of subsection (4) to Scotland, the reference to settled property is to be read as a reference to property held in trust.

Foreign maintenance payments

730

(1) No liability to income tax arises under Part 5 in respect of an annual payment if—

(a) it is a maintenance payment,

(b) it arises outside the United Kingdom, and

(c) had it arisen in the United Kingdom it would be exempt from income tax under section 727 (certain annual payments by individuals).

(2) In subsection (1) “maintenance payment” means a periodical payment which meets conditions A and B.

(3) Condition A is that the payment is made under a court order or a written or oral agreement.

(4) Condition B is that the payment is made by a person—

(a) as one of the parties to a marriage or civil partnership to, or for the benefit of, and for the maintenance of, the other party,

(b) to any person under 21 for that person's own benefit, maintenance or education, or

(5) In subsection (4) “marriage” includes a marriage that has been dissolved or annulled , and “civil partnership” includes a civil partnership that has been dissolved or annulled .

(6) Subsection (1) also applies to a payment made by an individual's personal representatives if—

(a) the individual would have been liable to make it, and

(b) that subsection would have applied if the individual had made it.

Periodical payments of personal injury damages etc.

Periodical payments of personal injury damages

731

(1) No liability to income tax arises for the persons specified in section 733 in respect of periodical payments to which subsection (2) applies or annuity payments to which subsection (3) applies.

(2) This subsection applies to periodical payments made pursuant to—

(a) an order of the court, so far as it is made in reliance on section 2 of the Damages Act 1996 (c. 48) (periodical payments) (including an order as varied),

(b) an order of a court outside the United Kingdom which is similar to an order made in reliance on that section (including an order as varied),

(c) an agreement, so far as it settles a claim or action for damages in respect of personal injury (including an agreement as varied),

(d) an agreement, so far as it relates to making payments on account of damages that may be awarded in such a claim or action (including an agreement as varied), or

(e) a Motor Insurers' Bureau undertaking in relation to a claim or action in respect of personal injury (including an undertaking as varied).

(3) This subsection applies to annuity payments made under an annuity purchased or provided—

(a) by the person by whom payments to which subsection (2) applies would otherwise fall to be made, and

(b) in accordance with such an order, agreement or undertaking as is mentioned in subsection (2) or a varying order, agreement or undertaking.

(4) In this section “damages in respect of personal injury” includes damages in respect of a person's death from personal injury.

(5) In this section “personal injury” includes disease and impairment of physical or mental condition.

(6) In this section “a Motor Insurers' Bureau undertaking” means an undertaking given by —

(a) the Motor Insurers' Bureau (being the company of that name incorporated on 14th June 1946 under the Companies Act 1929 (c. 23)), or

(b) an Article 75 insurer under the Bureau's Articles of Association.

Compensation awards

732

(1) No liability to income tax arises for the persons specified in section 733 in respect of annuity payments if they are made under an annuity purchased or provided under an award of compensation made under the Criminal Injuries Compensation Scheme or the Victims of Overseas Terrorism Compensation Scheme.

(2) The Treasury may by order provide for sections 731, 733 and 734 to apply, with such modifications as they consider necessary, to periodical payments by way of compensation for personal injury for which provision is made under a scheme or arrangement other than the Criminal Injuries Compensation Scheme or the Victims of Overseas Terrorism Compensation Scheme.

(3) In this section—

“the Criminal Injuries Compensation Scheme” means—the schemes established by arrangements made under the Criminal Injuries Compensation Act 1995 (c. 53),arrangements made by the Secretary of State for compensation for criminal injuries in operation before the commencement of those schemes, orthe scheme established under the Criminal Injuries (Northern Ireland) Order 2002 (S.I. 2002/796) (N.I.1), and

“personal injury” includes disease and impairment of physical or mental condition.

Persons entitled to exemptions for personal injury payments etc.

733

The persons entitled to the exemptions given by sections 731(1) and 732(1) for payments are—

(a) the person entitled to the damages under the order, agreement, undertaking or to the compensation under the award in question (“A”),

(b) a person who receives the payment in question on behalf of A, and

(c) a trustee who receives the payment in question on trust for the benefit of A under a trust under which A is, while alive, the only person who may benefit.

Payments from trusts for injured persons

734

(1) No liability to income tax arises for the persons specified in subsection (2) in respect of sums paid under a lifetime trust—

(a) to the person (“A”) who is entitled to—

(i) a payment under an order, agreement or undertaking within section 731(2) or an annuity purchased or provided as mentioned in section 731(3), or

(ii) compensation under an award within section 732(1), or

(b) for the benefit of A.

(2) The persons are—

(a) A, and

(b) if subsection (1)(b) applies, a person who receives the sum on behalf of A.

(3) For the purposes of subsection (1), sums are paid under a lifetime trust if they are paid—

(a) by the trustees of a trust under which A is, while alive, the only person who may benefit, and

(b) out of payments within section 731(2) or (3) or 732(1) which are received by them on trust for A.

Health and employment insurance payments

735

(1) No liability to income tax arises under this Act in respect of an annual payment under an insurance policy if—

(a) the payment is a benefit provided under so much of the policy as insures against a health or employment risk (see section 736),

(b) no part of any premiums under the policy has been deductible in calculating the income of the insured for income tax purposes, and

(c) the conditions in sections 737 and 738 and, so far as applicable, those in sections 739 and 740 are met in relation to the policy.

(2) Subsection (1)(b) is subject to section 743.

(3) For the meaning of “the insured”, see sections 742 and 743(2).

Health and employment risks and benefits

736

(1) For the purposes of sections 735 and 737 to 743, a policy insures against a health risk if it insures against the insured becoming, or becoming in any specified way, subject—

(a) to any physical or mental illness, disability, infirmity or defect, or

(b) to any deterioration in a condition resulting from any such illness, disability, infirmity or defect.

(2) For the purposes of sections 735 and 737 to 743, a policy insures against an employment risk if it insures against circumstances arising as a result of which the insured ceases—

(a) to be employed or hold office, or

(b) to carry on any trade, profession or vocation.

(3) For the purposes of section 735, this section and sections 737 to 743, references to insurance against a risk include insurance providing for benefits payable otherwise than by way of indemnity if the circumstances insured against occur.

Period for which payments may be made

737

(1) The condition in this section is that the only annual payments provided for by the policy which relate to the health or employment risk it insures against (“the insured risk”) are payments in respect of one or more of the following periods.

(2) They are—

(a) a period throughout which an illness, disability, infirmity or defect insured against by the part of the policy relating to the insured risk continues,

(b) a period throughout which, in circumstances insured against by the part of the policy relating to the insured risk, the insured is unemployed, does not hold an office or is not carrying on a trade, profession or vocation,

(c) a period throughout which, in circumstances insured against by the part of the policy relating to the insured risk, the insured's income is less than it would otherwise have been, and

(d) where a period within paragraph (a), (b) or (c) ends with the death of the insured, a period immediately following that period.

(3) For the purposes of subsection (2)(a), an illness, disability, infirmity or defect is treated as continuing during a period of convalescence or rehabilitation related to it.

(4) For the purposes of subsection (2)(c), income from the policy is ignored.

Risk of significant loss

738

(1) The condition in this section is that throughout the period that the policy has contained provisions relating to the health or employment risk those provisions have been such that any policy of insurance which only contained those provisions would involve the possibility that the insurer would make a significant loss on the premiums.

(2) In determining whether a policy would involve that possibility, any return on the investment of the premiums is to be taken into account.

(3) For this purpose reinsurance is ignored.

Conditions to be met by policies also providing other benefits

739

(1) The conditions in this section only apply if the policy provides for the payment of benefits which do not all relate to the health or employment risk.

(2) The conditions are that so far as the policy's terms relate to the health or employment risk—

(a) they do not differ significantly from what they would have been if the only benefits had been those relating to that risk, and

(b) the way in which they are given effect does not differ significantly from the way in which they would have been given effect in that case.

(3) A difference relating only to the reduction of benefits payable to or in respect of a person because of other benefits being payable to or in respect of the person is to be ignored.

(4) For the purposes of this section, all the persons for whose benefit the policy provides insurance against the health or employment risk are to be considered.

Conditions to be met where policies are linked

740

(1) The conditions in this section only apply if—

(a) the insured is or has been the insured under one or more other policies (“connected policies”), and

(b) each of the connected policies has been in force either—

(i) at a time when the policy in question was in force, or

(ii) at the time immediately before it was entered into.

(2) The conditions are that so far as the terms of the policy relate to the health or employment risk—

(a) they do not differ significantly from what they would have been if no connected policies had been entered into, and

(b) the way in which they are given effect does not differ significantly from the way in which they would have been given effect in that case.

(3) A difference relating only to the reduction of benefits payable to or in respect of a person under the policy because of benefits being payable to or in respect of the person under any of the connected policies is to be ignored.

(4) For the purposes of this section, all the persons for whose benefit the policy provides insurance against the health or employment risk are to be considered.

Aggregation of policies where employment ends for health reasons

741

(1) This section applies if—

(a) payments are made to or in respect of a person who has left employment because of the occurrence of something insured against by an employment policy as a health risk,

(b) the payments are made under another policy (“the replacement policy”) which was entered into under, or in accordance with, provisions contained in the employment policy,

(d) the rights in accordance with which the payments are made under the replacement policy superseded rights under the employment policy with effect from the time when that policy ceased to apply to the person.

(2) The employment policy and the replacement policy are to be treated as a single policy for the purposes of sections 735 to 738, this section and section 743.

(3) In this section—

“employment” includes an office, and “employees” and “employer” are to be read accordingly, and

“employment policy” means a policy entered into wholly or partly for the benefit of the employees of an employer against a health risk.

Meaning of “the insured”

742

In sections 735 to 737 “the insured” includes—

(a) the insured's spouse or civil partner ,

(b) any child under 21 of the insured or the insured's spouse or civil partner , and

(c) any person on whom any liabilities arising from an actual or proposed transaction identified in the policy will fall jointly with the insured or the insured's spouse.

Policies for the benefit of others who contribute to premiums

743

(1) This section applies if—

(a) a policy of insurance is taken out by one person (“A”) wholly or partly for the benefit of another (“B”),

(b) B makes payments or contributions in respect of the premiums, and

(c) annual payments under the policy are wholly or partly attributable, on a just and reasonable basis, to the payments or contributions made by B.

(2) So far as those benefits are so attributable, B is to be treated as the insured in relation to that policy for the purposes of sections 735 to 742.

(3) So far as those benefits are so attributable, payments or contributions not made by B are ignored for the purposes of section 735(1)(b) (no part of the premiums to have been deductible in calculating the insured's income).

Payments to adopters

Payments to adopters: England and Wales

744

(1) No liability to income tax arises in respect of the following payments—

(a) any payment or reward falling within section 57(3) of the Adoption Act 1976 (c. 36) (payments authorised by the court) which is made to a person who has adopted or intends to adopt a child,

(b) payments under section 57(3A)(a) of that Act (payments by adoption agencies of legal or medical expenses of persons seeking to adopt),

(c) payments of allowances under regulations under section 57A of that Act (permitted allowances to persons who have adopted or intend to adopt children),

(d) payments of financial support made in the course of providing adoption support services within the meaning of the Adoption and Children Act 2002 (c. 38) (see section 2(6) and (7) of that Act), ...

(e) payments made under regulations under paragraph 3(1) of Schedule 4 to that Act (transitional and transitory provisions: adoption support services),

(f) payments made under regulations under section 14F of the Children Act 1989 (special guardianship support services) to a person appointed as a child's special guardian,

(g) payments made to a person under section 17 of that Act (provision of services for children in need, their families and others) by reason of that person being a person named in a child arrangements order as a person with whom a child is to live ,

(h) payments made to a person, in respect of a child, under paragraph 15 of Schedule 1 to that Act (local authority contribution to child's maintenance to recipients with whom child is living, or is to live, as a result of a child arrangements order ), and

(i) payments made in accordance with—

(i) an order under that Schedule (orders for financial relief against parents etc), or

(ii) a maintenance agreement,

for the benefit of a child, to a person appointed as the child's special guardian or a person named in a child arrangements order as a person with whom the child is to live .

(j) payments made to a person under sections 37 to 39 of the Social Services and Well-being (Wales) Act 2014 (meeting care and support needs of children) by reason of that person being named in a child arrangements order as a person with whom a child is to live.

(2) But a payment is not within subsection (1)(f), (g), (h) , (i) or (j) if—

(a) it is made to an excluded relative of the child,

(b) it is made to a person appointed as the child's special guardian and an excluded relative is also appointed as the child's special guardian, or

(c) it is made to a person (“P”) named in a child arrangements order as a person with whom the child is to live and an excluded relative who lives in the same household as P is also named in that order as a person with whom the child is to live.

(3) In this section—

“excluded relative”, in relation to a child, means—a parent of the child, ora person who is, or has been, the husband or wife or civil partner of a parent of the child;

“maintenance agreement” has the meaning given by paragraph 10(1) of Schedule 1 to the Children Act 1989;

“child arrangements” has the meaning given by section 8 of that Act.

Payments to adopters: Scotland

745

(1) No liability to income tax arises in respect of the following payments—

(a) any payment which is an excepted payment by virtue of paragraph (a) or (c) of subsection (2) of section 73 of the Adoption and Children (Scotland) Act 2007 (asp 4), which is made to a person who has adopted or intends to adopt a child,

(b) payments which are excepted payments by virtue of paragraph (b) of that subsection,

(d) payments of allowances in accordance with an adoption allowances scheme under section 71 of that Act,

(e) payments made to a person under section 50 of the Children Act 1975, or section 22 of the Children (Scotland) Act 1995, by reason of that person being a person with whom a child is to live by virtue of a residence order, and

(f) payments of aliment made—

(i) in accordance with an award of aliment under the Family Law (Scotland) Act 1985, or

(ii) under an agreement (within the meaning of section 7(5) of that Act),

for the benefit of a child, to a person in whose favour a residence order with respect to the child is in force.

(2) A payment is not within subsection (1)(e) or (f) if—

(a) it is made to an excluded relative of the child, or

(b) it is made to a person in whose favour a residence order is in force with respect to the child and that order is also in favour of an excluded relative.

(3) In this section—

“excluded relative”, in relation to a child, means—a parent of the child, ora person who is, or has been, the husband or wife or civil partner of a parent of the child;

“residence order” has the meaning given by section 11(2)(c) of the Children (Scotland) Act 1995.

Payments to adopters: Northern Ireland

746

(1) No liability to income tax arises in respect of the following payments—

(a) any payment or reward falling within Article 59(2)(b) of the Adoption (Northern Ireland) Order 1987 (S.I. 1987/2203 (N.I. 22)) (payments authorised by the court) which is made to a person who has adopted or intends to adopt a child,

(b) any payment under Article 59(2)(c) of that Order (payments by registered adoption societies) which is made to a person who has adopted or intends to adopt a child, ...

(c) payments of allowances under regulations under Article 59A of that Order (permitted allowances to persons who have adopted or intend to adopt children),

(d) payments made to a person under Article 18 of the Children (Northern Ireland) Order 1995 (S.I. 1995/755 (NI 2)) (general duty of authority to provide personal social services) by reason of that person being a person in whose favour a residence order with respect to a child is in force,

(e) payments made to a person, in respect of a child, under paragraph 17 of Schedule 1 to that Order (local authority contribution to child's maintenance to recipients in whose favour residence order is in force), and

(f) payments made in accordance with—

(i) an order under that Schedule (orders for financial relief against parents etc), or

(ii) a maintenance agreement,

for the benefit of a child, to a person in whose favour a residence order with respect to the child is in force.

(2) But a payment is not within subsection (1)(d), (e) or (f) if—

(a) it is made to an excluded relative of the child, or

(b) it is made to a person in whose favour a residence order is in force with respect to the child and that order is also in favour of an excluded relative.

(3) In this section—

“excluded relative”, in relation to a child, means—a parent of the child, ora person who is, or has been, the husband or wife or civil partner of a parent of the child;

“maintenance agreement” has the meaning given by paragraph 12 of Schedule 1 to the Children (Northern Ireland) Order 1995;

“residence order” has the meaning given by Article 8 of that Order.

Power to amend sections 744 to 746

747

The Treasury may by order amend section 744, 745 or 746 for the purposes of—

(a) adding a description of payment, or

(b) removing a description of payment if the power to make a payment of that description has been repealed or revoked or has otherwise ceased to be exercisable.

Payments by persons liable to pool betting duty

748

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 9 — Other income

Interest only income

Interest paid under repayment supplements

749

Reading this document does not replace reading the official text published on legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0. We assume no responsibility for any inaccuracies arising from the conversion of the original CLML XML to this format.

This text is published under legislation.gov.uk's own terms of reuse, not a Legalize or public-domain licence. legislation.gov.uk
Open Government Licence v3.0 (attribution required)
© Crown and database right. Derived from content available under the Open Government Licence v3.0 from legislation.gov.uk.