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HMRC internal manual

Company Taxation Manual

Particular bodies: health service bodies: IT deducted from payments received

Tax deducted from interest received by a health service body (within the meaning of CTA10/S986 - see CTM40355) is repayable. The amount concernedmay be deducted in arriving at the amount payable on form CT61 (see CTM40355), in which case no further repayment is due, or may be the subject of a separate repayment claim (see CTM40365).

Some health service bodies purchase annuities to fund damages awards to former patients in negligence cases where those damages are spread over the life of the individual.  This type of damages award is known as a ‘structured settlement’.  Any such annuity is paid to the health service body after deduction of tax.  The health service body can reclaim the tax deducted.

If a model structured settlement agreement has been followed, the payments made by the health service body to the former patient will almost certainly be instalments of capital and not income.  If so, tax should not be deducted by the health service body from these payments.

Payments to health service bodies on or after 1 October 2002 can however be made without deduction of tax if the conditions in ITA07/S930 are satisfied.  The circumstances under which a payment to a health service body can be made gross on or after this date are explained at CTM35215.