18. Where a claimant receives income under an annuity purchased with a loan which satisfies the following conditions—
(a)that the loan was made as part of a scheme under which not less than 90% of the proceeds of the loan were applied to the purchase by the person to whom it was made of an annuity ending with that person’s life or with the life of the survivor of two or more persons (in this paragraph referred to as “the annuitants”) who include the person to whom the loan was made;
(b)that the interest on the loan is payable by the person to whom it was made or by one of the annuitants;
(c)that at the time the loan was made the person to whom it was made or each of the annuitants had attained the age of 65;
(d)that the loan was secured on a dwelling in Great Britain and the person to whom the loan was made or one of the annuitants owns an estate or interest in that dwelling; and
(e)that the person to whom the loan was made or one of the annuitants occupies the accommodation on which it was secured as that person’s home at the time the interest is paid,
the amount, calculated on a weekly basis equal to—
(i)where, or insofar as, section 369 of the Income and Corporation Taxes Act 1988(1) (mortgage interest payable under deduction of tax) applies to the payments of interest on the loan, the interest which is payable after deduction of a sum equal to income tax on such payments at the applicable percentage of income tax within the meaning of section 369(1A) of that Act(2);
(ii)in any other case the interest which is payable on the loan without deduction of such a sum.
Subsection (1A) of section 369 was inserted by the Finance Act 1999 (c. 16), Schedule 4, paragraph 4.