Revenue Note for Guidance
This section provides for the deduction of tax at source from annuities and other annual payments charged with tax under Schedule D where the annual payment is not payable or not wholly payable out of profits/gains brought into charge. The deduction is at the standard rate of income tax in force at the time of the payment.
Both this section and section 237 apply to similar type payments (that is, annuities, other annual payments and patent royalties). However, this section applies only where the payments are not payable or not wholly payable out of profits/gains “brought into charge”. The reference to “brought into charge” is a reference to brought into charge to income tax. In the case of a person chargeable to income tax, this section applies to such annual payments, etc to the extent that the total of such payments made by a person in a tax year exceeds the income of the person chargeable to income tax for that year.
The section also applies to annual payments, etc made out of exempt income or paid by persons exempt from income tax, as such payments are made from income which is not within the charge to income tax. In addition, the section applies to annual payments, etc made out of capital.
As a company within the charge to corporation tax cannot be within the charge to income tax it follows that the section also applies to annual payments made by a company chargeable to corporation tax.
The section is extended by —
Excluded from the scope of the section are —
(2) Where an annuity or other annual payment charged to tax under Schedule D is not paid or is not wholly paid out of profits/gains brought into charge to income tax, the person who makes the payment (including a company chargeable to corporation tax), or the person making the payment on another person’s behalf, is obliged to deduct out of the payment a sum of income tax representing income tax at the standard rate of income tax in force at the time the payment is made. This requirement also applies in the case of patent royalties which are not paid or not wholly paid out of profits/gains brought into charge to tax.
(1) & (3) The person making the deduction is required to deliver without delay an account to the inspector (being such inspector as the Revenue Commissioners may direct) of the payment, or of so much of the payment not made out of profits/gains brought into charge to tax, and of the income tax deducted from it. On receipt of this account, the inspector is required to assess and charge the payment on the payer so as to enable the income tax deducted to be demanded.
(4) Where such an account is not made to the inspector or the inspector is not satisfied with the account, he/she may make an estimated assessment.
(5) The various mechanisms for the charging, assessing, collection and recovery of income tax are applied for the purposes of this section.
(5A) A person aggrieved by an assessment made under this section may appeal the assessment by notice in writing to the Appeal Commissioners. The appeal must be made within 30 days after the date of the notice of assessment. The Appeal Commissioners will hear and determine an appeal in the manner provided for in Part 40A of the Act
A person may not appeal if they have not filed a self assessed return and paid the amount due in accordance with their own self assessment (where the person is required to file a return).
(2) & (7) Excluded from the scope of this section are —
Relevant Date: Finance Act 2021