Income Tax (Trading and Other Income) Act 2005

725 Annual payments under immediate needs annuities

(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).