Source: http://www.annuitiescentral.co.uk/annuities-338.htm
Timestamp: 2018-03-22 21:10:39
Document Index: 651200559

Matched Legal Cases: ['art 6', 'art 4', 'art 4', 'art 4', 'art 2', 'art 1', 'art 2', 'art 3', 'art 5']

Part 6 — Exempt income
any amount relating to changes in the value of a FOTRA security, or
expenses related to holding it or to any transaction concerning it.
Condition A is that the person is the beneficial owner of the security.
Condition B is that the person is a person who would be exempt from tax on
the security under this Chapter.
Exemption for part of purchased life annuity payments
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).
Subsection (1) is subject to section 718.
The exemption under this section requires a claim.
In this Chapter “purchased life annuity” has the same meaning as in Chapter 7
of Part 4 (see section 423).
Excluded annuities
The exemption in section 717(1) does not apply to payments made under the
annuities specified in subsection (2).
The annuities are—
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),
an annuity purchased following a direction in a will, and
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
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
This section sets out the rules for determining the extent to which an annuity
payment is within the exemption in section 717(1).
The rules depend on—
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
whether or not the annuity’s term depends solely on the duration of a
human life or lives (see subsections (6) to (8)).
Chapter 7 — Purchased life annuity payments
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.
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”).
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).
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.
If the annuity’s term depends solely on the duration of a human life or lives—
the exempt proportion is determined as set out in section 720, and
the exempt sum is determined as set out in section 721.
If the annuity’s term also depends on another contingency—
the exempt proportion is the proportion which is just and reasonable,
having regard to the contingencies affecting the annuity and to section
720, and
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
In the case of an annuity within section 719(7) (term dependent solely on
duration of life), the exempt proportion is —equation: cross[times[char[A],char[P]],over[times[char[P],char[P]],times[char[A],char[V]]]]
The purchase price of the annuity is the total amount or value of the
consideration given for the annuity.
The actuarial value of the annuity payments is their value at the date when the
first of the payments starts to accrue.
That value is determined—
by reference to tables of mortality prescribed under section 724,
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
without discounting any payment for the time to elapse before it is
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
duration of life), the exempt sum is —equation: cross[cross[times[char[P],char[P]],over[num[1.0000000000000000,"1"],times[char[T], char[Y]]]],over[times[char[P],char[M]],num[12.0000000000000000,"12"]]]
TY is the expected term of the annuity in years (and any odd fraction of a
PM is the period in months (and any odd fraction of a month) in respect
of which the annuity payment is made.
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.
The expected term of the annuity is determined—
as at the date when the first annuity payment starts to accrue,
by reference to tables of mortality prescribed under section 724, and
payable as that person’s age in whole years on that date.
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
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—
consideration is not given solely for the annuity, or
it appears that the amount or value of the consideration nominally
given for it affected, or was affected by, the consideration given for
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
If subsection (1)(a) applies, the consideration is to be apportioned in such way
as is just and reasonable.
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.
Any question—
whether an annuity is a purchased life annuity for the purposes of
section 717, or
A person aggrieved by the Inland Revenue’s determination may appeal to the
If a person making a payment under an annuity—
has been given notice of such a determination in the way prescribed
under section 724, and
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
A notification of an alteration of a previous determination of any question is
itself a determination for the purposes of this Chapter.
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.
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.
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.
The Board of Inland Revenue may by regulations—
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,
apply any provision of the Income Tax Acts, with or without
modifications, for the purposes of those provisions or the regulations,
prescribe tables of mortality for the purposes of sections 720(4) and
721(4).
The regulations may, in particular, make provision about—
the time limit for making a claim for exemption from tax under section
717(1) or any consequential repayment of tax,
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,
the way in which such a determination is to be notified to the person
making the annuity payments,
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
the extent to which such a determination is to be binding and the
circumstances in which it may be reviewed, and
Subsection (2)(d) applies despite anything in section 348 of ICTA (charges on
Annual payments under immediate needs annuities
of an annual payment made under an immediate needs annuity as is made—
for the benefit of the person protected under that annuity, and
to a care provider or a local authority in respect of the provision of care
In this section “immediate needs annuity” means a contract for a purchased life
annuity—
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
under which benefits are payable in respect of the provision of care for
the person protected.
mental or physical impairment, or
injury, sickness or other infirmity,
which is expected to be permanent.
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.
“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).
The Treasury may by order amend—
subsection (3), so far as it applies for the purposes of subsection (2).
Meaning of “care provider”
In section 725 “care provider” means a person who—
carries on a trade, profession or vocation which consists of or includes
the provision of care, and
meets the care registration requirement.
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.
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).
Chapter 8 — Other annual payments
in Northern Ireland if the person is registered in respect of the provision of care
Part 2 or 3 of the Registered Homes (Northern Ireland) Order 1992 (S.I.
1992/3204 (N.I. 20)), or
Part 3 of the Health and Personal Social Services (Quality,
Improvement and Regulation) (Northern Ireland) Order 2003 (S.I.
2003/431 (N.I. 9)).
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).
The Treasury may by order amend this section.
No liability to income tax arises under Part 5 in respect of an annual payment
is made by an individual, and
arises in the United Kingdom.
section 728 (commercial payments), and
section 729 (payments for non-taxable consideration).
Subsection (1) also applies to a payment made by an individual’s personal
representatives if—
the individual would have been liable to make it, and
that subsection would have applied if the individual had made it.
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.
Payments for non-taxable consideration
A payment that meets condition A is only exempt from income tax under
section 727(1) if condition B or C is met.
the payment is made under a liability incurred at any time for
consideration in money or money’s worth, and
some or all of the consideration is not required to be brought into
account in calculating the payer’s income for income tax purposes.
Condition B is that the payment is income within section 627(1) (payments on
divorce or separation) in the recipient’s hands.
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
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
it is a maintenance payment,
it arises outside the United Kingdom, and
had it arisen in the United Kingdom it would be exempt from income
tax under section 727 (certain annual payments by individuals).
In subsection (1) “maintenance payment” means a periodical payment which
meets conditions A and B.
Condition A is that the payment is made under a court order or a written or
Condition B is that the payment is made by a person—
as one of the parties to a marriage to, or for the benefit of, and for the
maintenance of, the other party,
to any person under 21 for that person’s own benefit, maintenance or
to any person for the benefit, maintenance or education of a person
In subsection (4) “marriage” includes a marriage that has been dissolved or
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.
This subsection applies to periodical payments made pursuant to—