CTM09005 - Corporation Tax: charges on income: introduction

ICTA88/S338 to S338B were substituted for the former S338 by FA02/S84 (2) and FA02/SCH30 with effect from 25 July 2002.

FA02/SCH30/PARA1 made consequential amendments to ensure that the general rules on deductions and charges in ICTA88/S337, S337A and S338 were consistent with the treatment of expenditure in respect of intangible fixed assets (FA02/SCH29). In the process the opportunity was taken to recast the sections in the style developed by the Tax Law Rewrite project. Apart from the provisions in ICTA88/S337A (2)(b) and ICTA88/S338 (5)(b) (see CTM09020), the existing rules were preserved (subject to obsolete rules not being retained).

• ICTA88/S338 now sets out the substantive rules for relieving charges on income.
• ICTA88/S338A defines charges on income.
• ICTA88/S338B further defines one element of that definition, namely ‘annuities or other annual payments’.
• ICTA88/S337A (1) provides that, subject to any provision expressly authorising a deduction:
• • a company’s profits shall be computed without any deduction in respect of dividends or other distributions

  • and

  • a company’s income from any source shall be computed without any deduction in respect of charges on income.

• ICTA88/S338 (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.
• ICTA88/S338 (3) limits the deduction to the amount that reduces the company’s total profits for the period to nil.
• ICTA88/S338 (4) allows the deduction only in respect of payments made by the company in the accounting period concerned.