Office of Public Sector Information
PART 6 continued CHAPTER 5 continued
(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).
(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
(c) 3½% War Loan 1952 Or After.
(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.
(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 3 of Part 17 of ICTA (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.
(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 person not ordinarily UK resident.
(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 person not ordinarily UK resident if none of the beneficiaries of the trust is ordinarily UK resident at the time when 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.
(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.
(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) The exemption under this section requires a claim.
(4) In this Chapter “purchased life annuity” has the same meaning as in Chapter 7 of Part 4 (see section 423).
(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.
(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.
(1) In the case of an annuity within section 719(7) (term dependent solely on duration of life), the exempt proportion is —
where—
AP is the annuity payment,
PP is the purchase price of the annuity, and
AV 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
(c) without discounting any payment for the time to elapse before it is payable.
(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.
(1) In the case of an annuity within section 719(7) (term dependent solely on duration of life), the exempt sum is —
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), and
PM 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.
(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.
(1) Any question—
(a) whether an annuity is a purchased life annuity for the purposes of section 717, or
(b) how much of an annuity payment is exempt,
is to be determined by the Inland Revenue.
(2) A person aggrieved by the Inland Revenue’s determination may appeal to the Special Commissioners.
(3) If a person making a payment under an annuity—
(a) has been given notice of such a determination in the way prescribed under section 724, and
(b) has not been notified of any alteration of it,
the determination is conclusive for determining the amount of income tax the person may or must deduct from it or for which the person is liable in respect of it.
(4) A notification of an alteration of a previous determination of any question is itself a determination for the purposes of this Chapter.
(5) Subsection (6) applies if a person making an annuity payment to which the exemption in section 717(1) applies has not been given notice in the way prescribed under section 724 of the amount which is exempt.
(6) The amount of income tax the person may or must deduct, or for which the person is liable, is the amount it would be if none of the payment were exempt.
(7) A person who knowingly makes any false statement or false representation for the purpose of obtaining any exemption from or repayment of tax for any person under sections 717 to 722, this section or section 724 is liable to a penalty not exceeding £3,000.
(1) The Board of Inland Revenue may by regulations—
(a) prescribe the procedure to be used in giving effect to sections 717 to 723 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,
(c) prescribe tables of mortality for the purposes of sections 720(4) and 721(4).
(2) The regulations may, in particular, make provision about—
(a) the time limit for making a claim for exemption from tax under section 717(1) or any consequential repayment of tax,
(b) the information to be provided in connection with the determination of the questions mentioned in section 723(1) and the persons who may be required to provide it,
(c) the way in which such a determination is to be notified to the person making the annuity payments,
(d) the way in which such a determination is to be given effect and the making of assessments for that purpose on the person entitled to the annuity,
(e) the extent to which such a determination is to be binding and the circumstances in which it may be reviewed, and
(f) the time limit for appealing against such a determination.
(3) Subsection (2)(d) applies despite anything in section 348 of ICTA (charges on income).
(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).
(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 and Wales if the person is registered under Part 2 of the Care Standards Act 2000 (c. 14) in respect of the provision of 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 Part 1 of the Regulation of Care (Scotland) Act 2001 (asp 8).
(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.
(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.
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.
(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 divorce 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.
(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 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
(c) to any person for the benefit, maintenance or education of a person under 21.
(5) In subsection (4) “marriage” includes a marriage 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.
(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.
(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.
(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.
(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, or
the 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.
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.
(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.
Income Tax (Trading and Other Income) Act 2005