Income Tax (Trading and Other Income) Act 2005 section 686

Payments received after deduction of tax

Section 686 deals with how income tax deducted at source from annual payments is treated as tax already paid by the recipient.

• When a payer deducts income tax from an annual payment, the recipient is treated as having paid that income tax themselves
• This treatment applies specifically to annual payments that fall within the relevant chapter of the Act
• The rule aligns with the broader principle in the Income Tax Act 2007 that tax deducted at source counts as tax paid by the recipient
• A separate but related rule applies to discretionary trust payments, where tax treated as deducted is regarded as paid by either the recipient or the settlor