What power does section 724 of ITTOIA 2005 give to HMRC?

Section 724 gives HMRC a broad regulation-making power to prescribe procedures for administering the purchased life annuity exemption under sections 717 to 722. HMRC can specify administrative steps for annuity providers and taxpayers, apply provisions from other parts of the Income Tax Acts with or without modifications, and designate the mortality tables used in exempt proportion calculations.

Why does HMRC need the power to specify mortality tables under section 724?

When an annuity payment depends on someone's life expectancy, the exempt proportion is calculated using actuarial mortality tables. Section 724 allows HMRC to prescribe and update these tables without requiring new primary legislation each time. This ensures calculations remain actuarially appropriate as life expectancy data changes over time.

What happened to subsections (2) and (3) of section 724 ITTOIA 2005?

Subsections (2) and (3) of section 724 were repealed by the Finance Act 2007 and the Income Tax Act 2007 respectively. Only subsection (1) remains in force. The practical effect is that the regulation-making power described in subsection (1) now constitutes the entirety of the operative section.

How do HMRC regulations under section 724 affect annuity providers in practice?

HMRC regulations made under section 724 require annuity providers to follow prescribed administrative procedures when applying the purchased life annuity exemption. This includes calculating the exempt proportion of each payment using approved mortality tables, identifying the taxable element, and reporting it correctly through the PAYE system on behalf of the annuitant.

Income Tax (Trading and Other Income) Act 2005 section 724

Regulations

Section 724 gives HMRC the power to make regulations governing the administration of the purchased life annuity exemption rules.

HMRC may prescribe procedures for applying the purchased life annuity exemption (sections 717 to 722) where those sections do not already specify a process
HMRC may apply any provision of the Income Tax Acts, with or without modifications, for the purposes of the annuity exemption rules or the regulations themselves
HMRC may prescribe the mortality tables to be used when calculating the exempt proportion of life-dependent annuity payments under sections 720(4) and 721(4)
Subsections (2) and (3) have been repealed by subsequent legislation, leaving subsection (1) as the sole operative provision

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