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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Corporation Tax: introduction: charitable donations relief: formerly charges on income

Before Finance Act 2002

Prior to FA02 ICTA88/S337 (2)(b) prohibited the deduction of annuities, annual payments or payments within ICTA88/S348 (2) in computing income for CT purposes (CTM01130).

After Finance Act 2002

FA02 revised this legislation such that ICTA88/S337A (1)(b) prohibited a deduction in computing income from any source for charges on income.

ICTA88/S338A 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 meet the conditions specified in ICTA88/S338B.

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

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 CTM80100 onwards.

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

The charges regime was significantly restricted. The effect is 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 CTM09000 onwards.