Income Tax Act 2007 section 450

Other persons: payments ineligible for relief

Section 450 sets out the circumstances in which a payment made by a person other than an individual (covered by section 449) is denied income tax relief, either wholly or in part.

• A payment is ineligible for relief if it can lawfully only be made out of capital or out of income that is exempt from income tax, or if it is actually charged to capital.
• If the payer treats a payment as made from tax-exempt income and this affects anyone's rights or obligations (present or future), relief is denied on that payment or the relevant part.
• If the payment is not ultimately borne by the person making it — for example because they are reimbursed — relief is denied, as allowing it would effectively give double tax relief.
• However, relief is preserved where the reason the payer does not ultimately bear the cost is that they received a taxable amount (on which they are liable to income tax) that funded the payment.