CTM01140 | Corporation Tax: introduction: charitable donations relief: formerly charges on income

From HM Revenue & Customs · Company Taxation Manual

Before Finance Act 2002

Prior to , ICTA88/S337 (2)(b) prohibited the deduction of annuities, annual payments or payments within ICTA88/S348 (2) in computing income for CT purposes (). Instead, so far as paid out of profits brought into the charge to CT, ICTA88/S338, relief for these charges was given as a deduction against total profits.

After Finance Act 2002

revised this legislation such that ICTA88/S337A (1)(b) prohibited a deduction in computing income from any source for charges on income defined more narrowly.

ICTA88/S338A now defined charges on income for the purposes of CT. The only items that fell within the definition were:

  • qualifying donations to charity within the meaning of section ICTA88/S339,

  • gifts of shares etc to charities within ICTA88/S587B (2)(a)(ii), and

  • for payments made prior to 16 March 2005, annuities or other annual payments which met the conditions specified in ICTA88/S338B.

No payment that was deductible in computing CT profits could be treated as a charge on income allowable against total profits.

Interaction with group relief: charges on income paid during an accounting period were deducted from total profits reduced by any other relief except group relief (ICTA88/S338). There is guidance on group relief at onwards.

After Finance (No.2) Act 2005: charitable donations relief

The charges regime was significantly restricted. The effect was to restrict charges on income for CT purposes to payments to a charity with effect for payments made on or after 16 March 2005. The reference is therefore now to charitable donations relief. There is more detailed guidance on these at onwards.