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(1)M1The following provisions of this section shall have effect for the purpose of the interpretation of sections 695 to 700.
(2)A person shall be deemed to have an absolute interest in the residue of the estate of a deceased person, or in a part of such residue, if and so long as the capital of the residue or of that part would, if the residue had been ascertained, be properly payable to him, or to another in his right, for his benefit, or is properly so payable, whether directly by the personal representatives or indirectly through a trustee or other person.
(3)A person shall be deemed to have a limited interest in the residue of the estate of a deceased person, or in a part of such residue, during any period, being a period during which he has not an absolute interest in the residue or in that part, where the income of the residue or of that part for that period would, if the residue had been ascertained at the commencement of that period, be properly payable to him, or to another in his right, for his benefit, whether directly by the personal representatives or indirectly through a trustee or other person.
[F1(3A)“Applicable rate”, in relation to any amount which a person is deemed by virtue of this Part to receive or to have a right to receive, means the basic rate [F2, the lower rate or the Schedule F ordinary rate] according as the income of the residue of the estate out of which that amount is or would be paid bears tax at the basic rate [F2, the lower rate or the Schedule F ordinary rate]; and in determining for the purposes of this Part whether or how much of any payment is or would be deemed to be made out of income that bears tax at one rate rather than another—
(a)such apportionments of the amounts bearing tax at different rates shall be made between different persons with interests in the residue of the estate as are just and reasonable in relation to their different interests; and
(b)subject to paragraph (a) above, it shall be assumed that—
[F3(i)]payments are to be made out of income bearing tax at the basic rate before they are made out of income bearing tax at the lower rate [F4or the Schedule F ordinary rate][F5; and
(ii)that payments are to be made out of income bearing tax at the lower rate before they are made out of income bearing tax at the Schedule F ordinary rate.]]
(4)“Personal representatives” means, in relation to the estate of a deceased person, his personal representatives as defined in relation to England and Wales by section 55 of the M2Administration of Estates Act 1925, and persons having in relation to the deceased under the law of another country any functions corresponding to the functions for administration purposes under the law of England and Wales of personal representatives as so defined; and references to “personal representatives as such” shall be construed as references to personal representatives in their capacity as having such functions.
(5)“Specific disposition” means a specific devise or bequest made by a testator, and includes the disposition of personal chattels made by section 46 of the Administration of Estates Act 1925 and any disposition having, whether by virtue of any enactment or otherwise, under the law of another country an effect similar to that of a specific devise or bequest under the law of England and Wales.
Real estate included (either by a specific or general description) in a residuary gift made by the will of a testator shall be deemed to be a part of the residue of his estate and not to be the subject of a specific disposition.
(6)Subject to subsection (7) below, “charges on residue” means, in relation to the estate of a deceased person, the following liabilities, properly payable thereout and interest payable in respect of those liabilities, that is to say—
(a)funeral, testamentary and administration expenses and debts, and
(b)general legacies, demonstrative legacies, annuities and any sum payable out of residue to which a person is entitled under the law of intestacy of any part of the United Kingdom or any other country, and
(c)any other liabilities of his personal representatives as such.
(7)Where, as between persons interested under a specific disposition or in a general or demonstrative legacy or in an annuity and persons interested in the residue of the estate, any such liabilities as are mentioned in subsection (6) above fall exclusively or primarily upon the property that is the subject of the specific disposition or upon the legacy or annuity, only such part (if any) of those liabilities as falls ultimately upon the residue shall be treated as charges on residue.
(8)References to the aggregate income of the estate of a deceased person for any year of assessment shall be construed as references to the aggregate income from all sources for that year of the personal representatives of the deceased as such, treated as consisting of—
(a)any such income which is chargeable to United Kingdom income tax by deduction or otherwise, such income being computed at the amount on which that tax falls to be borne for that year; and
(b)any such income which would have been so chargeable if it had arisen in the United Kingdom to a person resident and ordinarily resident there, such income being computed at the full amount thereof actually arising during that year, less such deductions as would have been allowable if it had been charged to United Kingdom income tax;
but excluding any income from property devolving on the personal representatives otherwise than as assets for payment of the debts of the deceased.
This subsection has effect subject to sections [F6F7. . . ] 249(5), 421(2), 426(3) F8 and 547(1)(c).
(9)“United Kingdom estate” means, as regards any year of assessment, an estate the income of which comprises only income which either—
(a)has borne United Kingdom income tax by deduction, or
(b)in respect of which the personal representatives are directly assessable to United Kingdom income tax,
not being an estate any part of the income of which is income in respect of which the personal representatives are entitled to claim exemption from United Kingdom income tax by reference to the fact that they are not resident, or not ordinarily resident, in the United Kingdom.
(10)“Foreign estate” means, as regards any year of assessment, an estate which is not a United Kingdom estate.
[F9(10A)Amounts to which section 699A(1)(a) and (b) applies shall be disregarded in determining whether an estate is a United Kingdom estate or a foreign estate, except that any estate the aggregate income of which comprises only such amounts shall be a United Kingdom estate.]
(11)In a case in which different parts of the estate of a deceased person are the subjects respectively of different residuary dispositions, this Part shall have effect in relation to each of those parts with the substitution—
(a)for references to the estate of references to that part of the estate; and
(b)for references to the personal representatives of the deceased as such of references to his personal representatives in their capacity as having the functions referred to in subsection (4) above in relation to that part of the estate.
(12)In this Part—
(a)references to sums paid include references to assets that are transferred or that are appropriated by a personal representative to himself, and to debts that are set off or released;
(b)references to sums payable include references to assets as to which an obligation to transfer or a right of a personal representative to appropriate to himself is subsisting on the completion of the administration and to debts as to which an obligation to release or set off, or a right of a personal representative so to do in his own favour, is then subsisting; and
(c)references to amount shall be construed, in relation to such assets as are referred to in paragraph (a) or (b) above, as references to their value at the date on which they were transferred or appropriated, or at the completion of the administration, as the case may require, and, in relation to such debts as are so referred to, as references to the amount thereof.
(13)M3In this Part references to the administration period shall be construed in accordance with section 695(1).
(14)F10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F1S. 701(3A) inserted (27.7.1993 with effect for the year 1993-1994 and subsequent years of assessment) by 1993 c. 34, s. 79, Sch. 6 paras. 11(3), 25(1)
F2Words in s. 701(3A) substituted (with effect in accordance with s. 33(11) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 33(8)
F3Words in s. 701(3A)(b) renumbered as s. 701(3A)(b)(i) (with effect in accordance with s. 33(11) of the amending Act) by virtue of Finance (No. 2) Act 1997 (c. 58), s. 33(9)(a)
F4Words in s. 701(3A)(b)(i) inserted (with effect in accordance with s. 33(11) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 33(9)(b)
F5S. 701(3A)(b)(ii) added (with effect in accordance with s. 33(11) of the amending Act) by Finance (No. 2) Act 1997 (c. 58), s. 33(9)(c)
F6Words in s. 701(8) inserted (3.5.1994) by Finance Act 1994 (c. 9), Sch. 16 para. 16
F7Words in s. 701(8) repealed (with effect in accordance with Sch. 6 para. 13(2) of the repealing Act) by Finance (No. 2) Act 1997 (c. 58), Sch. 6 para. 13(1), Sch. 8 Pt. 2(11)
F8 Words
“426(3)”
repealed by 1989 s.187and Sch.17 Part Vin relation to accounting periods beginning after 31March 1989.
F9S. 701(10A) inserted (with effect in accordance with s. 76(6) of the amending Act) by Finance Act 1995 (c. 4), s. 76(5)
F10S. 701(14) repealed (1.5.1995) by Finance Act 1995 (c. 4), Sch. 18 para. 7, Sch. 29 Pt. 8(10)
Modifications etc. (not altering text)
C1 Definition applied for purposes of 1979(C)—see 1979(C) s.155(1).
Marginal Citations
M1Source-1970 s.432; 1972 Sch.24 25; 1975 (No.2) s.34(5)
M3Source-1970 s.426(1)
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