Income Tax (Trading and Other Income) Act 2005 section 725

Annual payments under immediate needs annuities

Section 725 provides an income tax exemption for annual payments made under immediate needs annuities, where those payments are made to care providers or local authorities for the benefit of the person protected by the annuity.

• Annual payments under an immediate needs annuity are exempt from income tax, provided they are made for the benefit of the protected person and paid to a care provider or local authority for that person's care.
• An immediate needs annuity is a purchased life annuity contract designed to protect someone who, at the time the contract is made, cannot live independently due to a permanent mental or physical impairment, injury, sickness or other infirmity.
• "Care" means accommodation, goods or services that are necessary or desirable to provide to a person because of their permanent condition, and a "care provider" is defined separately in section 726 of the Act.
• The Treasury has the power to amend the definition of an immediate needs annuity and the qualifying conditions by order.