Commentary on Sections Overview Overview Section 899: Meaning of “qualifying annual payment”
2715.This section defines “qualifying annual payment”. It is based on sections 7(1), 125(1), 348(1A), 349(1A) and 687(1) of ICTA.
2716.Under the source legislation, for an annual payment to be within the scope of sections 348 and 349 of ICTA it had to be charged to tax:
	under Schedule D Case III;
	under Chapters 7 or 10 of Part 4, section 579, or Chapters 4 or 7 of Part 5 of ITTOIA (and not be relevant foreign income); or
	under sections 609 and 611 of ITEPA.
2717.This takes account of the amendments made by paragraph 62 of Schedule 10 to FA 2005 (pension schemes etc) with effect from 6 April 2007.
2718.Subsection (2) specifies that the payment must arise in the United Kingdom. This follows from the fact that historically Case III was limited to United Kingdom sources and it is necessary to introduce this specific condition because United Kingdom sources and foreign sources are dealt with together in ITTOIA.
2719.Subsection (3) addresses the case where the recipient is a person other than a company and identifies all the provisions in ITEPA and ITTOIA under which annual payments formerly within Case III may be chargeable.
2720.Subsection (4) addresses the case where the recipient is a company. If the company is liable to income tax then the income must be within the provisions set out in subsection (3). But if the company is liable to corporation tax Case III still applies.
2721.Subsection (5) excludes a number of types of payment from the provisions in this Chapter.
2722.Payments treated as made to unit holders from unauthorised unit trusts are not specifically excluded here. That is because they are dealt with in Chapter 13 of this Part and, following the approach adopted in Chapter 10 of Part 4 of ITTOIA, such amounts are no longer treated as annual payments. So it is irrelevant to consider whether they are “qualifying”.
2723.If an annual payment is made by a building society, it is subject to the rule that payment includes crediting: see the Income Tax (Building Societies) (Annual Payments) Regulations 1991 (SI 1991/512).