Commentary on Sections Part 10: Miscellaneous income Overview
2478.The Chapter sets out the charge to corporation tax on income on any annual payments that are not charged to tax by any other provision of this Act or any other legislation. It is based on the part of section 18 Schedule D Case III (b) of ICTA which deals with annual payments and the part of section 18 Schedule D Case V of ICTA which deals with foreign annual payments. The corresponding rules for income tax are in Chapter 7 of Part 5 of ITTOIA.
2479.Annuity payments made under purchased life annuities and distributions from unauthorised unit trusts (which in the source legislation are treated as annual payments) are generally regarded as investment income. A company which is the recipient of a payment under a purchased life annuity contract is deemed to be a party to a creditor relationship (see sections 561 and 562 of this Act). The application of the charge to corporation tax on income for distributions from unauthorised unit trusts is in section 972 of this Act. As the application of the charge to corporation tax on income for annual payments in this Chapter takes effect only if an amount is not otherwise charged to corporation tax, there is no overlap between the various provisions.
2480.The phrase “annual payment” is retained but is not defined in the Act or in the source legislation. Instead it derives its meaning from an extensive body of case law. That case law illustrates that the phrase has a meaning for tax purposes far different from its natural one. Replacing that phrase would risk breaking the link to case law without making the law any clearer or easier to understand.