CTM01180 - Corporation Tax: introduction: IT deduction from certain payments

ICTA88/S7 (1) says that no payment made by a company resident in the UK is to be treated for any of the purposes of the Taxes Acts as paid out of profits or gains brought into charge to IT. ICTA88/S349 applies to annual payments etc not paid out of profits or gains brought into charge to IT, and so catches such payments made by a company resident in the UK.

Prior to 1 April 2001 where a payment made by such a company:

• was within ICTA88/S349, and
• was not a distribution

the company had to:

• deduct IT from the payment, and
• account for that tax in accordance with the provisions of ICTA88/SCH16.

However there were special provisions in ICTA88/S247 (4) to enable certain payments between members of a group of companies to be made in full. You can see how the provisions applied to consortia at CTM80900 onwards.

Payments made after 1 April 2001 are governed by ICTA88/S349A - S349D. From that date, companies no longer had to deduct IT from annuities, annual payments etc where the recipient was another company within the charge to CT.

From 1 October 2002, companies no longer have to deduct tax on such payments to a much wider range of recipients. For full details see CTM35200 onwards.