Income Tax (Trading and Other Income) Act 2005

Charge to tax on estate income U.K.

649 Charge to tax on estate income U.K.

(1) Income tax is charged on estate income.

(2) In this Chapter—

• “estate income” means the income treated under this Chapter as arising from an absolute, limited or discretionary interest in the whole or part of the residue of an estate, and

• “estate” means the estate of a deceased person (whether a UK estate or a foreign estate).

(3) Estate income is treated as income for income tax purposes.

(4) If different parts of an estate are subject to different residuary dispositions, those parts are treated for the purposes of this Chapter as if they were separate estates.

650 Absolute, limited and discretionary interests U.K.

(1) A person has an absolute interest in the whole or part of the residue of an estate for the purposes of this Chapter if—

(a) the capital of the residue or that part is properly payable to the person, or

(b) it would be so payable, if the residue had been ascertained.

(2) A person has a limited interest in the whole or part of the residue of an estate during any period for the purposes of this Chapter if—

(a) the person does not have an absolute interest in it, and

(b) the income from it would be properly payable to the person if the residue had been ascertained at the beginning of that period.

(3) A person has a discretionary interest in the whole or part of the residue of an estate for the purposes of this Chapter if—

(a) a discretion may be exercised in the person's favour, and

(b) on its exercise in the person's favour any of the income of the residue during the whole or part of the administration period (see section 653) would be properly payable to the person if the residue had been ascertained at the beginning of that period.

(4) For the purposes of this section, an amount is only treated as properly payable to a person if it is properly payable to the person, or to another in the person's right, for the person's benefit, except where subsection (5) applies.

(5) The personal representatives of a deceased person (“A”) are to be treated as having an absolute or limited interest in the whole or part of the residue of the estate of another deceased person (“B”) if—

(a) they have a right in their capacity as A's personal representatives, and

(b) were the right vested in them for their own benefit, they would have that interest in B's estate.

(6) For the purposes of subsection (4), it does not matter whether the amount is payable directly by the personal representatives or through a trustee or other person.

Modifications etc. (not altering text)

C1 S. 650(1) applied (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), ss. 952(6), 1329(1) (with Sch. 2 Pts. 1, 2)

651 Meaning of “UK estate” and “foreign estate” U.K.

(1) In this Chapter—

• “UK estate”, in relation to a tax year, means an estate which meets conditions A and B, or condition C, for that year, and

• “foreign estate”, in relation to a tax year, means an estate which is not a UK estate in relation to that year.

(2) Condition A is that all the income of the estate either—

(a) has borne United Kingdom income tax by deduction, or

(b) is income in respect of which the personal representatives are directly assessable to United Kingdom income tax for the tax year.

(3) Condition B is that none of the income of the estate is income for which the personal representatives are not liable to United Kingdom income tax for the tax year because they are not UK resident F1 ....

(4) For the purposes of conditions A and B sums within section [F2 664(2)(c) or (d) or 680(4) (sums not liable to tax and sums] treated as bearing tax) are ignored.

(5) Condition C is that the aggregate income of the estate for the tax year consists only of sums within section [F3 664(2)(c) or (d) or 680(4)].

Textual Amendments

F1 Words in s. 651(3) omitted (with effect in accordance with Sch. 46 para. 72 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 50

F2 Words in s. 651(4) substituted (with effect in accordance with Sch. 1 para. 73 of the amending Act) by Finance Act 2016 (c. 24), Sch. 1 para. 20(a)

F3 Words in s. 651(5) substituted (with effect in accordance with Sch. 1 para. 73 of the amending Act) by Finance Act 2016 (c. 24), Sch. 1 para. 20(b)