Income and Corporation Taxes Act 1988

Annual payments

348 Payments out of profits or gains brought into charge to income tax: deduction of tax

(1) Subject to any provision to the contrary in the Income Tax Acts, where any annuity or other annual payment charged with tax under Case III of Schedule D, not being interest, is payable wholly out of profits or gains brought into charge to income tax—

(a) the whole of the profits or gains shall be assessed and charged with income tax on the person liable to the annuity or other annual payment, without distinguishing the annuity or other annual payment; and

(b) the person liable to make the payment, whether out of the profits or gains charged with income tax or out of any annual payment liable to deduction, or from which a deduction has been made, shall be entitled on making the payment to deduct and retain out of it a sum representing the amount of income tax thereon; and

(c) the person to whom the payment is made shall allow the deduction on receipt of the residue of the payment, and the person making the deduction shall be acquitted and discharged of so much money as is represented by the deduction, as if that sum had been actually paid; and

(d) the deduction shall be treated as income tax paid by the person to whom the payment is made.

(2) Subject to any provision to the contrary in the Income Tax Acts, where—

(a) any royalty or other sum paid in respect of the user of a patent; or

(b) any rent, royalty or other payment which, by section 119 or 120, is declared to be subject to deduction of income tax under this section or section 349 as if it were a royalty or other sum paid in respect of the user of a patent;

is paid wholly out of profits or gains brought into charge to income tax, the person making the payment shall be entitled on making the payment to deduct and retain out of it a sum representing the amount of the income tax thereon.

(3) This section does not apply to a small maintenance payment within the meaning of section 351 or to any payment to which section 687 applies.

349 Payments not out of profits or gains brought into charge to income tax, and annual interest

(1) Where—

(a) any annuity or other annual payment charged with tax under Case III of Schedule D, not being interest; or

(b) any royalty or other sum paid in respect of the user of a patent; or

(c) any rent, royalty or other payment which, by section 119 or 120, is declared to be subject to deduction of income tax under this section or section 348 as if it were a royalty or other sum paid in respect of the user of a patent,

is not payable or not wholly payable out of profits or gains brought into charge to income tax, the person by or through whom any payment thereof is made shall, on making the payment, deduct out of it a sum representing the amount of income tax thereon.

This subsection does not apply to any payment to which section 687 applies.

(2) Subject to subsection (3) below and to any other provision to the contrary in the Income Tax Acts, where any yearly interest of money chargeable to tax under Case III of Schedule D is paid—

(a) otherwise than in a fiduciary or representative capacity, by a company or local authority; or

(b) by or on behalf of a partnership of which a company is a member; or

(c) by any person to another person whose usual place of abode is outside the United Kingdom;

the person by or through whom the payment is made shall, on making the payment, deduct out of it a sum representing the amount of income tax thereon for the year in which the payment is made.

(3) Subsection (2) above does not apply—

(a) to interest payable in the United Kingdom on an advance from a bank carrying on a bona fide banking business in the United Kingdom; or

(b) to interest paid by such a bank in the ordinary course of that business; or

(c) to any payment to which section 124 applies; or

(d) to any payment to which section 369 or 479(1) applies;

and subsection (1) above does not apply to any small maintenance payment within the meaning of section 351.

350 Charge to tax where payments made under section 349

(1) Where any payment within section 349 is made by or through any person, that person shall forthwith deliver to the inspector an account of the payment, and shall be assessable and chargeable with income tax at the basic rate on the payment, or on so much thereof as is not made out of profits or gains brought into charge to income tax.

(2) In section 349(1) any reference to a payment or sum as being not payable, or not wholly payable, out of profits or gains brought into charge to income tax shall be construed as a reference to it as being payable wholly or in part out of a source other than profits or gains brought into charge; and any such reference elsewhere in the Tax Acts shall be construed accordingly.

(3) All the provisions of the Income Tax Acts relating to persons who are to be chargeable with income tax, to income tax assessments, and to the collection and recovery of income tax, shall, so far as they are applicable, apply to the charge, assessment, collection and recovery of income tax under this section.

(4) Section 349 and this section have effect subject to the provisions of Schedule 16 which has effect for the purpose of regulating the time and manner in which companies resident in the United Kingdom—

(a) are to account for and pay income tax in respect of payments from which tax is deductible under section 349, and

(b) are to be repaid income tax in respect of payments received by them;

and for that purpose the Board may by regulations modify, supplement or replace any of the provisions of Schedule 16; and references in this Act and in any other enactment to any of those provisions shall be construed as including references to any such regulations.

(5) Without prejudice to the generality of subsection (4) above, regulations under that subsection may, in relation to income tax for which a company is liable to account, modify any provision of Parts II to VI of the Management Act or apply any such provision with or without modifications.

(6) Regulations under this section may—

(a) make different provision for different descriptions of companies and for different circumstances and may authorise the Board, where in their opinion there are special circumstances justifying it, to make special arrangements as respects income tax for which a company is liable to account or the repayment of income tax borne by a company;

(b) include such transitional and other supplemental provisions as appear to the Board to be expedient or necessary.

(7) The Board shall not make any regulations under this section unless a draft of them has been laid before and approved by a resolution of the House of Commons.

351 Small maintenance payments

(1) In this section “small maintenance payments” means payments under an order made by a court in the United Kingdom—

(a) by one of the parties to a marriage (including a marriage which has been dissolved or annulled) to or for the benefit of the other party to that marriage for that other party’s maintenance,

(b) to any person under 21 years of age for his own benefit, maintenance or education, or

(c) to any person for the benefit, maintenance or education of a person under 21 years of age,

in respect of which the two conditions mentioned in subsection (2) below are satisfied; and “small maintenance order” means an order providing for the making of small maintenance payments.

(2) The first of the conditions referred to in subsection (1) above is—

(a) in the case of payments falling within paragraph (a) of that subsection, that the order for the time being requires them to be made—

(i) weekly at a rate not exceeding £48 per week, or

(ii) monthly at a rate not exceeding £208 per month;

(b) in the case of payments falling within paragraph (b) (but not within paragraph (a)) of that subsection, that the order for the time being requires them to be made—

(i) weekly at a rate not exceeding £48 per week, or

(ii) monthly at a rate not exceeding £208 per month;

(c) in the case of payments falling within paragraph (c) (but not within paragraph (a) or (b)) of that subsection, that the order for the time being requires them to be made—

(i) weekly at a rate not exceeding £25 per week, or

(ii) monthly at a rate not exceeding £108 per month;

and the second of those conditions is that the payments would fall within section 348 or 349(1), apart from subsection (3) of each of those sections and subsection (3) below.

(3) Small maintenance payments shall be made without deduction of income tax.

(4) Any sums paid in or towards the discharge of a small maintenance payment shall be chargeable under Case III of Schedule D, but the tax shall (notwithstanding anything in sections 64 to 67) be computed in all cases on the payments falling due in the year of assessment, so far as paid in that or any other year.

(5) A person making a claim in that behalf shall be entitled, in computing his total income for any year of assessment for any of the purposes of the Income Tax Acts, to deduct sums paid by him in or towards the discharge of any small maintenance payments which fall due in that year; and, for the purposes of section 276, any amount which can be deducted under this subsection in computing the total income of a person shall be treated as if it were income the tax on which that person is entitled to charge against another person.

(6) The Treasury may from time to time by order increase any, or all, of the amounts for the time being specified in subsection (2) above.

(7) An order under subsection (6) above which increases the amount for the time being specified in sub-paragraph (i) of paragraph (a), (b) or (c) of subsection (2) above shall increase the amount for the time being specified in sub-paragraph (ii) of that paragraph so that it is 52 twelfths of the amount specified in sub-paragraph (i) by virtue of the order or, if that does not give a convenient round sum, such other amount as appears to the Treasury to be the nearest convenient round sum; and an order under that subsection may contain provision whereby it—

(a) does not in general affect payments falling due in the year of assessment in which it comes into force under small maintenance orders made before its coming into force, but

(b) in the case of a small maintenance order which was made before that time but is varied or revived after that time, does apply in relation to payments falling due under that order at any time after the variation or revival.

(8) Where a court—

(a) makes or revives a small maintenance order, or

(b) varies or revives an order so that it becomes, or ceases to be, a small maintenance order, or

(c) changes the persons who are entitled to small maintenance payments,

the court shall furnish to the Board, in such form as the Board may prescribe, particulars of the order or variation, as the case may be, the names of the persons affected by the order, and, so far as is known to the court, the addresses of those persons.

In this subsection—

(i) “the persons affected”, in relation to a small maintenance order, means the person liable to make the payments under the order and any person for the time being entitled to the payments, and

(ii) references to the variation of an order include references to the making of an order changing the persons entitled to the payments under it.

352 Certificates of deduction of tax

(1) A person making any payment which is subject to deduction of income tax by virtue of section 339, 348, 349 or 687 shall, if the recipient so requests in writing, furnish him with a statement in writing showing the gross amount of the payment, the amount of tax deducted, and the actual amount paid.

(2) The duty imposed by subsection (1) above shall be enforceable at the suit or instance of the person requesting the statement.