Taxes Consolidation Act 1997 section 16

Income tax charged by deduction

Section 16 deals with how income tax is handled when tax is deducted at the standard rate from annual payments, and how these payments and deductions are allocated to particular tax years.

• Annual payments (such as annuities, royalties, or other recurring sums that are pure income profit in the hands of the recipient) must have income tax deducted at the standard rate before being paid.
• For the purpose of calculating a person's total income, any income received under deduction of tax at the standard rate is treated as income of the year in which it is assessed, even if it actually accrued before or after that year.
• Similarly, any deductions for annual payments made under deduction of tax at the standard rate are allowed as deductions for the year in question, regardless of when the sums actually accrued.
• Where a person makes annual payments (such as interest, annuities, or patent royalties) out of their income, the portion of their income equal to those payments is charged to tax at the standard rate only, even if their other income is taxed at the higher rate.