Law

Income Tax Act 2007

United Kingdom · statute

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In force since 2026-09-16, as the publisher states.

Copy read on 2026-11-08. The page it was read from

Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.

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Contents: 1,664 provisions

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1,664 provisions

880 Interest paid on advances from building societies

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on an advance from a building society.

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881 National Savings Bank interest

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on deposits with the National Savings Bank.

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882 Quoted Eurobond interest

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on a quoted Eurobond (see section 987).

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883 Interest on loan to buy life annuity

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest to which section 369 of ICTA applies (interest on loan to buy life annuity payable under deduction of tax).

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884 Relevant foreign income

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest which is chargeable to income tax as relevant foreign income. (2) For the meaning of “relevant foreign income”, see section 989.

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885 Authorised persons dealing in financial instruments

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest made by a person authorised for the purposes of FISMA 2000 if— (a) the person's business consists wholly or mainly of dealing in financial instruments as principal, and (b) the payment is made by that person in the ordinary course of that business. (2) For the meaning of “financial instrument”, see section 984.

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886 Interest paid by recognised clearing houses etc

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest made by a relevant entity if— (a) the relevant entity is carrying on business as the provider of a central counterparty clearing service or as a central securities depository, and (b) the interest is paid in the ordinary course of that business, on margin or other collateral deposited with it by users of the service or as a central securities depository. (2) The duty to deduct a sum representing income tax under section 874 does not apply to interest treated by virtue of section 607 (treatment of price differences under repos), or paragraph 5 of Schedule 13 to FA 2007 (relief for borrower for finance charges in case of debtor repos and debtor quasi-repos), as paid by a relevant entity in respect of contracts made by it as the provider of a central counterparty clearing service or as a central securities depository . (3) In this section— “central counterparty clearing service” means the service provided by a relevant entity to the parties to a transaction where there are contracts between each of the parties and the relevant entity (in place of, or as an alternative to, a contract directly between the parties), and “relevant entity”, means any of the following (as defined for the purposes of FISMA 2000 by section 285 of that Act)— a recognised clearing house; a recognised investment exchange; ... a third country central counterparty. a recognised CSD; ... a third country CSD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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887 Payments made by registered societies

(1) The duty to deduct a sum representing income tax under section 874 does not apply to either of the following payments if they are payable to a person whose usual place of abode is in the United Kingdom— (a) a payment of interest made by a registered society in respect of any mortgage, loan, loan stock or deposit, or (b) any interest, dividend, bonus or other sum payable to a shareholder of such a society by reference to the amount of the shareholder's holding in the share capital of the society. (2) A registered society must, within 3 months after the end of each of its accounting periods, deliver to an officer of Revenue and Customs a return containing the information mentioned in subsection (3). (3) That information is— (a) the name and place of residence of every person to whom the society has, as a result of this section, made one or more payments in the period amounting in total to at least £15 without deducting a sum (or sums) representing income tax, and (b) the amount so paid in the period to each of those persons. (4) See section 500(2) of CTA 2009 as to the consequences of not making a return as required by subsection (2). (5) In this Chapter “registered society” means— (a) a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014, (b) a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969. (c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or (d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society. (6) For the purposes of this section crediting interest (or amounts treated as interest) counts as paying it.

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888 Statutory interest

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest made by virtue of the contractual term implied by section 1(1) of the Late Payment of Commercial Debts (Interest) Act 1998 (c. 20) (statutory interest).

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888A Qualifying private placements

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on a qualifying private placement. (2) “Qualifying private placement” means a security— (a) which represents a loan relationship to which a company is a party as debtor, (b) which is not listed on a recognised stock exchange, and (c) in relation to which such other conditions as the Treasury may specify by regulations are met. (3) The conditions which may be specified under subsection (2)(c) include conditions relating to— (a) the security itself, (b) the loan relationship represented by the security, (c) the terms on which, or circumstances under which, the security or loan relationship is entered into, (d) the company which is party to the loan relationship as debtor, (e) any person by or through whom a payment of interest on the security is made, or (f) the holder of the security. (4) Regulations under this section may make provision about the consequences of failing to make a deduction under section 874, in respect of a payment of interest on a security, in cases where the person required to make the deduction had a reasonable, but mistaken, belief that the security was a qualifying private placement. (5) Regulations under this section may— (a) make different provision for different cases; (b) contain incidental, supplemental, consequential and transitional provision and savings. (6) In this section “loan relationship” has the same meaning as in Part 5 of CTA 2009.

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888B Designated dividends of investment trusts

The duty to deduct a sum representing income tax under section 874 does not apply to a dividend so far as it is treated as a payment of yearly interest by regulations under section 45 of FA 2009 (dividends designated by investment trust or prospective investment trust).

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888C Interest distributions of certain open-ended investment companies

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of yearly interest under section 373 of ITTOIA 2005 (in the case of certain open-ended investment companies, payments of yearly interest treated as made where distributable amount shown in accounts as yearly interest).

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888D Interest distribution of certain authorised unit trusts

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of yearly interest under section 376 of ITTOIA 2005 (in the case of certain authorised unit trusts, payments of yearly interest treated as made where distributable amount shown in accounts as yearly interest).

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888DA Payments of interest by a QAHC

The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest (however the interest arises) by a QAHC (within the meaning of Schedule 2 to FA 2022).

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888E Interest on certain peer-to-peer lending

(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on an amount of peer-to-peer lending. (2) In subsection (1) “peer-to-peer lending” means credit in relation to which the condition in subsection (4) is met. (3) In this section— “original borrower”, in relation to any credit, means the person to whom the credit is originally provided, “credit” includes a cash loan and any other form of financial accommodation, and “original lender”, in relation to any credit, means the person who originally provides the credit. (4) The condition is that— (a) the original borrower and the original lender enter the agreement under which the credit is provided at the invitation of a person (“the operator”), (b) the operator makes the invitation in the course of, or in connection with, operating an electronic system, (c) the operator's operation of the electronic system is an activity specified in article 36H(1) or (2D) of the Order (operating an electronic system in relation to lending), and (d) the operator has permission under Part 4A of FISMA 2000 to carry on that activity. (5) For the purposes of subsection (4), it does not matter if the agreement mentioned in subsection (4)(a) is not an article 36H agreement (as defined in article 36H of the Order). (6) The Commissioners for Her Majesty's Revenue and Customs may by regulations make such amendments of the preceding provisions of this section as they consider appropriate in consequence of— (a) the Order, or any part of it, being replaced (or further replaced) by provision in another instrument, or (b) any amendment of the Order or any such other instrument. (7) In this section “the Order” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544).

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889 Payments in respect of building society securities

(1) This section applies to any payment made in a tax year if— (a) it is a payment of a dividend or interest in respect of a security issued by a building society, and (b) conditions A and B are met in relation to the security. (2) Condition A is that the security was listed or capable of being listed on a recognised stock exchange at the time the dividend or interest became payable. (3) Condition B is that the security is not— (a) a qualifying certificate of deposit (see section 985), (b) a qualifying uncertificated eligible debt security unit (see section 986), or (c) a quoted Eurobond (see section 987). (4) The person by or through whom the payment is made must, on making it, deduct from it a sum representing income tax on it at the savings basic rate in force for the tax year. (5) For provision about the collection of income tax in respect of a payment from which a sum must be deducted under this section— (a) see Chapter 15 if the person making the payment is a UK resident company, and (b) otherwise see Chapter 16. (6) See also Chapter 11 (payments between companies) for an exception from the duty to deduct sums representing income tax under this section. (7) In this section— “dividend” includes any distribution (whether or not described as a dividend), and “security” includes a share (and, in particular, a permanent interest bearing share as defined in section 117 of TCGA 1992).

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890 Overview of Chapter

(1) This Chapter contains provision about the deduction of sums representing income tax from payments of UK public revenue dividends. (2) Section 891 defines “UK public revenue dividend”. (3) Section 892 contains a duty to deduct sums representing income tax from payments of UK public revenue dividends unless they are payable gross. (4) Sections 893 and 894 explain when such payments are payable gross. (5) Sections 895 and 896 make provision for the making, and withdrawal, of applications for payments to be subject to the duty to deduct under this Chapter. (6) Section 897 contains a regulation-making power in connection with payments from which sums must be deducted under this Chapter.

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891 Meaning of “UK public revenue dividend”

In this Chapter “UK public revenue dividend” means any income from securities which— (a) is paid out of the public revenue of the United Kingdom or Northern Ireland, but (b) is not interest on local authority stock.

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892 Duty to deduct from certain UK public revenue dividends

(1) This section has effect if— (a) a payment of a UK public revenue dividend is made, and (b) it is not payable gross under section 893. (2) The person by or through whom the payment is made must, on making the payment, deduct from it a sum representing income tax on it at the basic rate in force for the tax year in which it is made. (3) For provision about the collection of income tax in respect of a payment from which a sum must be deducted under this section— (a) see Chapter 15 if the person making the payment is a UK resident company, and (b) otherwise see Chapter 16.

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893 Payments of UK public revenue dividends which are payable gross

(1) A payment of a UK public revenue dividend is payable gross if— (a) it is a payment of interest on gross-paying government securities, and (b) no deduction at source application has effect in respect of the securities at the time the payment is made (see section 895). (2) In this Chapter “gross-paying government securities” means— (a) gilt-edged securities (see section 1024), (aa) securities, so far as they are not gilt-edged securities, issued or treated as issued under— (i) the National Loans Act 1939, or (ii) the National Loans Act 1968, or (b) securities which are the subject of a Treasury direction under section 894(3).

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894 Treasury directions

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) The Treasury may, at the request of the Department of Finance and Personnel for Northern Ireland, direct that any securities issued under section 11(1)(c) of the Exchequer and Financial Provisions Act (Northern Ireland) 1950 (c. 3 (N.I.)) are gross-paying government securities. (4) In relation to any securities which are gross-paying government securities by virtue of a direction under subsection (3)— (a) references in sections 895 and 896 to “the Registrar” are to be read as references to the bank in the books of which the securities are registered or inscribed, and (b) references in those sections to the Treasury are to be read as references to the Department of Finance and Personnel for Northern Ireland. (5) A direction under subsection ... (3) in respect of any securities may provide that the direction is to have effect in relation only to payments of interest on the securities made on or after a date specified in the direction.

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895 Deduction at source application

(1) The holder of registered gross-paying government securities may make a deduction at source application in respect of the securities. (2) A deduction at source application in respect of any securities is an application— (a) for payments of interest on those securities to be subject to the duty to deduct sums representing income tax under section 892, (b) made to the Registrar, and (c) made in such form as the Registrar may, with the approval of the Treasury, prescribe. (3) A deduction at source application in respect of any securities has effect from the date which is one month after the date on which it is made until— (a) the securities cease to be registered in the name of the person who made the application, or (b) the application ceases to have effect under section 896 following its withdrawal in accordance with that section. (4) If any registered gross-paying government securities are held on trust, the holders of the securities may make a deduction at source application in respect of them without the consent of any other person. (5) Subsection (4) applies despite anything in the instrument creating the trust. (6) In this Chapter— “registered” means— entered in the register of the Registrar, or entered in a register maintained in accordance with regulations under section 785 of the Companies Act 2006 (provision enabling procedures for evidencing and transferring title), and “the Registrar” means the person or persons appointed in accordance with regulations under section 47(1)(b) of FA 1942 (see regulation 3 of the Government Stock Regulations 2004 (S.I. 2004/1611)).

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896 Withdrawal of application

(1) A deduction at source application may be withdrawn by notice given to the Registrar by the holder of the securities. (2) The notice must be given in such form as the Registrar may, with the approval of the Treasury, prescribe. (3) If withdrawn, a deduction at source application ceases to have effect on the date which is one month after the date on which the notice of withdrawal is received by the Registrar.

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897 Power to make regulations

(1) The Commissioners for Her Majesty's Revenue and Customs may by regulations— (a) make provision as to the time and manner in which persons are to account for and pay income tax in respect of payments from which they are required to deduct sums representing income tax under section 892, and (b) otherwise modify the provisions of section 892 and Chapters 15 and 16 in their application to such payments. (2) Regulations under this section may— (a) make different provision for different descriptions of UK public revenue dividend and for different circumstances, and (b) contain incidental, supplemental, consequential and transitional provision and savings. (3) The Commissioners for Her Majesty's Revenue and Customs must not make any regulations under this section unless a draft of them has been laid before and approved by a resolution of the House of Commons.

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898 Overview of Chapter

(1) This Chapter deals with the deduction of sums representing income tax from— (a) qualifying annual payments, and (b) royalties or other sums paid in respect of the use of patents. (2) See also— (a) Chapter 11 (payments between companies etc) for an exception from the duties to deduct sums representing income tax under this Chapter, (b) Chapter 4 of Part 8, which gives relief for certain payments from which sums representing income tax must be deducted under this Chapter, and (c) section 615(3) of ICTA (exemption from tax in respect of certain pensions) which contains a further exception from the duties to deduct sums representing income tax under this Chapter. (3) If a payment to which a provision of this Chapter applies is also one to which section 906 applies, it is treated as not being a payment to which a provision of this Chapter applies.

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899 Meaning of “qualifying annual payment”

(1) In this Chapter “qualifying annual payment” means an annual payment that meets the conditions in subsections (2) to (5). (2) The payment must arise in the United Kingdom. (3) If the recipient is a person other than a company, the payment must be— (a) a payment charged to income tax under— (i) Chapter 7 of Part 4 of ITTOIA 2005 (purchased life annuity payments), (ii) section 579 of that Act (royalties etc from intellectual property), (iii) Chapter 4 of Part 5 of that Act (certain telecommunication rights: non-trading income), or (iv) Chapter 7 of Part 5 of that Act (annual payments not otherwise charged), or (b) a payment charged to income tax under Part 9 of ITEPA 2003 because section 609 or 611 of that Act applies to it (certain employment-related annuities). (4) If the recipient is a company, the payment must be— (a) a payment charged to income tax as mentioned in subsection (3)(a), or (b) a payment which is— (i) required to be brought into account under Part 5 of CTA 2009 (loan relationships) as a non-trading credit, or (ii) from a source in the United Kingdom and chargeable to corporation tax under Chapter 7 of Part 10 of that Act (annual payments not otherwise charged) or regulation 15 of the Unauthorised Unit Trusts (Tax) Regulations 2013. (5) The payment must not be— (a) interest, (b) a payment which is a qualifying payment for the purposes of Chapter 2 of Part 6 of CTA 2010 (certain payments to charity), (c) a payment which is a qualifying donation for the purposes of Chapter 2 of Part 8 (gift aid), (d) a payment in relation to which income tax is treated as having been paid under section 494(3) (income tax treated as paid by beneficiary or settlor in relation to discretionary trust), (e) a payment which would fall within paragraph (d) but for the fact that the trustees making the payment are non-UK resident, or (f) an annual payment to which section 904 applies (annual payments for dividends or non-taxable consideration).

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900 Deduction from commercial payments made by individuals

(1) This section applies to any payment made in a tax year if— (a) it is a qualifying annual payment, (b) the person who makes it is an individual, and (c) it is made for genuine commercial reasons in connection with the individual's trade, profession or vocation. (2) The individual must, on making the payment, deduct from it a sum representing income tax on it at the basic rate in force for the tax year. (3) Income tax equal to the sum required to be deducted is to be collected through the individual's self-assessment return (see Chapter 17).

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901 Deduction from annual payments made by other persons

(1) This section applies to any payment made in a tax year if— (a) it is a qualifying annual payment, and (b) the person who makes it is not an individual. (2) But this section does not apply if— (a) an individual's personal representatives make the payment, (b) the individual would have been liable to make it if the individual had not died, and (c) the payment would not have been made for genuine commercial reasons in connection with the individual's trade, profession or vocation, had it been made by the individual. (3) If the person who makes the payment has some modified net income for the tax year (see section 1025)— (a) the person must, on making it, deduct from it a sum representing income tax on it at the basic rate in force for the tax year, and (b) income tax equal to the sum required to be deducted is to be collected through the person's self-assessment return (see Chapter 17). (4) If the person who makes the payment has no modified net income for the tax year the person by or through whom the payment is made must, on making it, deduct from it a sum representing income tax on it at the basic rate in force for the tax year in which the payment is made . (5) For provision about the collection of income tax in respect of a payment from which a sum must be deducted under subsection (4)— (a) see Chapter 15 if the person making the payment is a UK resident company, and (b) otherwise see Chapter 16.

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902 Meaning of “applicable rate” in section 901

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903 Deduction from patent royalties

(1) This section applies to any payment made in a tax year if— (a) it is a payment of a royalty or other sum in respect of the use of a patent, and (b) it meets the conditions in subsections (2) to (4). (2) The payment must not be— (a) a qualifying annual payment, or (b) an annual payment to which section 904 applies (annual payments for dividends or non-taxable consideration). (3) The payment must arise in the United Kingdom. (4) The payment must be one that is charged to income tax or corporation tax. (5) If the person who makes the payment is an individual— (a) the person must, on making the payment, deduct from it a sum representing income tax on it at the basic rate in force for the tax year, and (b) income tax equal to the sum required to be deducted is to be collected through the person's self-assessment return (see Chapter 17). (6) If the person who makes the payment is not an individual, and has some modified net income for the tax year (see section 1025)— (a) the person must, on making the payment, deduct from it a sum representing income tax on it at the basic rate in force for the tax year, and (b) income tax equal to the sum required to be deducted is to be collected through the person's self-assessment return (see Chapter 17). (7) If the person who makes the payment— (a) is not an individual, and (b) has no modified net income for the tax year, the person by or through whom the payment is made must, on making it, deduct from it a sum representing income tax on it at the basic rate in force for the tax year. (8) See Chapter 8 which makes special provision in relation to royalties (double taxation arrangements: deduction at treaty rate and EU companies: discretion to pay gross). (9) For provision about the collection of income tax in respect of a payment from which a sum must be deducted under subsection (7)— (a) see Chapter 15 if the person making the payment is a UK resident company, and (b) otherwise see Chapter 16.

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904 Annual payments for dividends or non-taxable consideration

(1) For the purposes of section 899(5)(f) and 903(2)(b) this section applies to an annual payment which meets the conditions in subsections (2) to (7). (2) The payment must be— (a) a payment charged to income tax under Part 5 of ITTOIA 2005 (miscellaneous income), or (b) a payment which is— (i) required to be brought into account under Part 5 of CTA 2009 (loan relationships) as a non-trading credit, or (ii) from a source in the United Kingdom and chargeable to corporation tax under Chapter 7 of Part 10 of that Act (annual payments not otherwise charged) or regulation 15 of the Unauthorised Unit Trusts (Tax) Regulations 2013. (3) The payment must be made under a liability incurred for consideration in money or money's worth all or any of which— (a) consists of a dividend or the right to receive a dividend, or (b) is not required to be brought into account in calculating for the purposes of income tax or corporation tax the income of the person making the payment. (4) The payment must not be a payment of income— (a) which arises under a settlement made by one party to a marriage or civil partnership by way of provision for the other— (i) after the dissolution or annulment of the marriage or civil partnership, or (ii) while they are separated under an order of a court, or under a separation agreement, or if the separation is likely to be permanent, and (b) which is payable to, or applicable for the benefit of, the other party. (5) The payment must not be made by an individual for genuine commercial reasons in connection with the individual's trade, profession or vocation. (6) The payment must not be made to an individual under a liability incurred at any time in consideration of the individual surrendering, assigning or releasing an interest in settled property to or in favour of a person with a subsequent interest. (7) The payment must not be a payment of an annuity granted in the ordinary course of a business of granting annuities. (8) In the application of this section to Scotland the reference in subsection (6) to settled property is to be read as a reference to property held in trust.

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905 Interpretation of Chapter

In this Chapter “individual” includes a Scottish partnership if at least one partner is an individual.

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906 Certain royalties etc where usual place of abode of owner is abroad

(1) This section applies to any payment made in a tax year where condition A or condition B is met. (2) Condition A is that— (a) the payment is a royalty, or a payment of any other kind, for the use of, or the right to use, intellectual property (see section 907), (b) the usual place of abode of the owner of the intellectual property is outside the United Kingdom, and (c) the payment is charged to income tax or corporation tax. (3) Condition B is that— (a) the payment is a payment of sums payable periodically in respect of intellectual property, (b) the person entitled to those sums (“the assignor”) assigned the intellectual property to another person, (c) the usual place of abode of the assignor is outside the United Kingdom, and (d) the payment is charged to income tax or corporation tax. (4) But this section does not apply if the payment is made in respect of copies of works, or articles, which have been exported from the United Kingdom for distribution outside the United Kingdom. (5) The person by or through whom the payment is made must, on making it, deduct from it a sum representing income tax on it at the basic rate in force for the tax year. (6) See— (a) Chapter 8 which makes special provision in relation to royalties (double taxation arrangements: deduction at treaty rate and EU companies: discretion to pay gross), and (b) Chapter 11 (payments between companies etc) for an exception from the duty to deduct sums representing income tax under this section. (7) For provision about the collection of income tax in respect of a payment from which a sum must be deducted under this section— (a) see Chapter 15 if the person making the payment is a UK resident company, and (b) otherwise see Chapter 16. (8) If a payment to which this section applies is also one to which a provision of Chapter 6 applies, it is treated as not being a payment to which a provision of Chapter 6 applies.

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907 Meaning of “intellectual property”

(1) In section 906 “intellectual property” means— (a) copyright of literary, artistic or scientific work, (b) any patent, trade mark, design, model, plan, or secret formula or process, (c) any information concerning industrial, commercial or scientific experience, or (d) public lending right in respect of a book. (2) In this section “copyright of literary, artistic or scientific work” does not include copyright in— (a) a cinematographic film or video recording, or (b) the sound-track of a cinematographic film or video recording, except so far as it is separately exploited.

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908 Royalty payments etc made through UK resident agents

(1) If— (a) a payment to which section 906 applies is made through an agent who is UK resident, and (b) the agent is entitled as against the owner of the right to deduct a sum as commission for services provided, section 906(5) and Chapters 8 (deduction at special rates), 15 and 16 (collection) apply as if the amount of the payment were the amount net of the sum deductible as commission. (2) But if the person by or through whom the payment is made does not know the commission is payable, or does not know its amount— (a) the sum representing income tax required to be deducted under section 906 must be calculated in the first instance on the total amount of the payment, and (b) the return to be made under Chapter 15 or the account of the payment under Chapter 16, must be based on that total amount.

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909 Royalty payments: further provision

(1) A payment to which section 906 applies is treated for all income and corporation tax purposes as made when it is made by the first person who makes it, not when it is made by or through any other person. (2) If, under section 906, a sum representing income tax must be deducted from a payment, any agreement to make the payment without deduction of that sum is void. (3) Section 906— (a) applies to payments on account of royalties as it applies to payments of royalties, and (b) applies to payments on account of sums payable periodically as it applies to payments of sums payable periodically.

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910 Proceeds of a sale of patent rights: payments to non-UK residents

(1) This section applies if a non-UK resident sells the whole or part of any patent rights and is chargeable in respect of the sale— (a) to income tax under section 587 of ITTOIA 2005, or (b) to corporation tax under section 912 of CTA 2009. (2) The person by or through whom the proceeds of the sale are paid must, on making any payment of— (a) the proceeds, or (b) an instalment of the proceeds, deduct from it a sum representing income tax on the chargeable amount at the basic rate in force for the tax year in which the payment is made. (3) In subsection (2) “the chargeable amount” means— (a) so much of the proceeds or instalment as consists of a capital sum, less (b) any incidental expenses of the sale which are deducted before payment. (4) Sections 597 to 599 of ITTOIA 2005 (licences connected with patents etc) apply for the purposes of this section as they apply for the purposes of sections 587 to 596 of that Act. (5) Section 4 of CAA 2001 (meaning of “capital sums” etc) applies in relation to this section as it applies in relation to that Act. (6) For further provision about the sum required to be deducted, see— (a) section 595 of ITTOIA 2005 (certain rules affecting the seller's income tax position do not affect the amount to be deducted), and (b) section 919 of CTA 2009 (certain rules affecting the seller's corporation tax position do not affect the amount to be deducted). (7) See Chapter 11 (payments between companies etc) for an exception from the duty to deduct sums representing income tax under this section. (8) For provision about the collection of income tax in respect of a payment from which a sum must be deducted under this section— (a) see Chapter 15 if the person making the payment is a UK resident company, and (b) otherwise see Chapter 16.

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911 Double taxation arrangements: deduction at treaty rate

(1) This section applies if— (a) a company pays a royalty from which it is required to deduct a sum representing income tax under Chapter 6 or 7, (b) the income tax in respect of the payment is collectible under Chapter 15 or 16, and (c) the company reasonably believes that, at the time the payment is made, the payee is entitled to relief in respect of the payment under double taxation arrangements. (2) The company may calculate the sum to be deducted from the payment under Chapter 6 or 7 by reference to the treaty rate. (3) But, if the payee is not at the time entitled to such relief, this Part has effect as if subsection (2) had never applied in relation to the payment. (4) In this section “the treaty rate” means the rate of income tax appropriate to the payee under the arrangements.

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912 Power to make directions disapplying section 911

(1) This section applies if an officer of Revenue and Customs is not satisfied that the payee will be entitled to relief under double taxation arrangements in respect of one or more payments of royalties that a company is to make. (2) The officer may direct the company that section 911 is not to apply to the payment or payments. (3) A direction under subsection (2) may be varied or revoked by a later direction.

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913 Interpretation of sections 911 and 912

(1) In sections 911 and 912 “royalty” includes— (a) a payment received as consideration for the use of, or the right to use, a copyright, patent, trade mark, design, process or information, and (b) the proceeds of the sale of the whole or part of any patent rights. (2) In sections 911 and 912 “payee” means the person beneficially entitled to the income in respect of which the payment is made.

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