CTM01140 - Corporation Tax: introduction: charges on income

Before Finance Act 2002

Prior to FA02 ICTA88/S337 (2)(b) prohibited the deduction of annuities, annual payments or payments within ICTA88/S348 (2) in computing income for CT purposes ( CTM01130).

After Finance Act 2002

FA02 revised this legislation such that ICTA88/S337A (1)(b) now prohibits a deduction in computing income from any source for charges on income.

ICTA88/S338A defines ‘charges on income’ for the purposes of CT. The only items that fall within the definition are:

• qualifying donations to charity within the meaning of section ICTA88/S339,
• gifts of shares etc to charities within ICTA88/S587B (2)(a)(ii), and
• for payments made prior to 16 March 2005, annuities or other annual payments which meet the conditions specified in ICTA88/S338B.

No payment that is deductible in computing CT profits can be treated as a charge on income.

Interaction with group relief: charges on income paid during an accounting period are deducted from total profits reduced by any other relief except group relief (ICTA88/S338). There is guidance on group relief at CTM80100 onwards.

Further guidance

There is more detailed guidance on charges at CTM09000 onwards.