CTM09005 - Corporation Tax: charges on income: introduction

This formerly wide category of CT relief is now much reduced in scope. ICTA88/S338 (now CTA10/S189) is the main relief provision and was substituted for the former S338 by FA02/S84 (2) and FA02/SCH30 with effect from 25 July 2002. The scoping provisions S338A to S338B were also amended by FA02. F(2)A05/S38 subsequently amended the definition of charges in S388A (now CTA10/S190) and S388B (which dealt with annuities and annual payments) was repealed. The effect is to restrict charges on income for CT purposes to payments to a charity with effect for payments made on or after 16 March 2005.

ICTA88/S337A (1), which provided that in computing a company’s income from any source for CT purposes no deduction is given for charges on income, has been replaced by CTA09/S1301B which refers instead to qualifying charitable donations.

CTA10/S189 (1) and (2) allow the deduction of charges on income from a company’s total profits (as reduced by any other relief except group relief) in computing CT chargeable for an accounting period.

CTA10/S189 (3) limits the deduction to the amount that reduces the company’s total profits for the period to nil.

CTA10/S189 (4) allows the deduction only in respect of payments made by the company in the accounting period concerned.