165. Purchased life annuities.

Income tax is charged on annuity payments made under a purchased life annuity1. Subject to the provisions outlined below, the charge is on the full amount of the annuity payments arising in the tax year, and the person liable is the person receiving or entitled to the annuity payments2.

For the purposes of these provisions, a purchased life annuity, other than an excepted annuity3, is treated as containing a capital element and, to the extent of that capital element, as not being an annual payment or in the nature of an annual payment