Commentary on Sections Overview Overview Section 1301: Restriction of deductions for annual payments
3326.This section prevents annual payments for which the consideration is either a dividend or not taxable from being deducted in calculating a company’s income from any source. It is based on section 125 of ICTA. The corresponding income tax rule is in sections 843 and 904 of ITA.
3327.Subsections (4) to (6) together set out the conditions that must be met by an annual payment in order for the rule in subsection (1) to apply to the payment.
3328.The source legislation specifies that the payment must not be interest (section 125(2)(a) of ICTA). Annual payments within subsection (2) do not include interest, so this does not need to be stated explicitly. In addition, no specific reference is made to annuities (also mentioned in the source legislation) as these are simply one type of annual payment.
3329.This section does not rewrite the exclusion in section 125(3)(a) of ICTA for payments which in the hands of the recipient are income falling within section 627(2)(a) of ITTOIA. Such payments cannot be relevant for corporation tax purposes since such payments can only be made by an individual. Nor does this section rewrite the commencement provision in section 125(5) of ICTA, which is spent.