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PART 5 continued CHAPTER 6 continued
The basic amount of estate income relating to a limited interest within section 674 for a tax year is the total of the sums within section 674(3)(b), (4)(c) and (5)(c) for that year.
(1) Such apportionments as are just and reasonable are to be made for the purposes of this Chapter if—
(a) the part of a residuary estate in which an interest within any of the provisions specified in subsection (2) subsists does not wholly correspond with the part in which another such interest held successively subsists, or
(b) one of those interests is in the whole of the residuary estate and the other is only in part of it.
(2) The provisions are—
section 671 (successive absolute interests),
section 672 (successive interests: assumed income entitlement of holder of absolute interest following limited interest),
section 673 (successive interests: payments in respect of limited interests followed by absolute interests),
section 674 (successive interests: holders of limited interest), and
section 675 (basic amount of estate income: successive limited interests).
(1) This section applies if—
(a) an estate is a foreign estate in relation to a tax year,
(b) United Kingdom income tax has been charged on a person for the tax year on estate income treated as arising from the estate under section 652 (estate income: absolute interests in residue), and
(c) United Kingdom income tax has already been borne by part of the aggregate income of the estate for the tax year.
(2) If the person makes a claim under this section, the income tax charged on the person on that estate income is to be reduced by an amount equal to—
where—
T is the income tax charged on the person,
A is so much of the aggregate income of the estate as has already borne United Kingdom income tax for the tax year, and
B is the aggregate income of the estate for the tax year.
(1) This section applies if—
(a) an estate is a foreign estate in relation to a tax year,
(b) United Kingdom income tax has been charged on a person for the tax year on estate income from the estate treated as arising under—
(i) section 654 (estate income: limited interests in residue), or
(ii) section 655 (estate income: discretionary interests in residue), and
(c) United Kingdom income tax has already been borne by part of the aggregate income of the estate for the tax year.
(2) If the person makes a claim under this section, the income tax charged on the person on that estate income is to be reduced by an amount equal to—
where—
T is the income tax charged on the person,
A is so much of the aggregate income of the estate as has already borne United Kingdom income tax for the tax year,
B is the aggregate income of the estate for the tax year, and
C is the amount of United Kingdom income tax already borne by the aggregate income of the estate for the tax year.
(1) The part of the aggregate income of the estate from which a basic amount is treated as paid is determined by applying assumptions A and B in that order.
(2) Assumption A is that if there are different persons with interests in the residue of the estate, payments in respect of their basic amounts are paid out of the different parts of the aggregate income of the estate in such proportions as are just and reasonable for their different interests.
(3) Assumption B is that payments are made from those parts in the following order—
(a) income bearing income tax at the basic rate,
(b) income bearing income tax at the lower rate, and
(c) income bearing income tax at the dividend ordinary rate.
(4) If some, but not all, of the aggregate income of the estate is income treated under section 680 as bearing income tax, assumption C is applied before assumptions A and B.
(5) Assumption C is that the basic amount is paid from income that is not within section 680 before it is paid from income within that section.
(6) Assumptions A and B then apply—
(a) first to determine the part of the income not within that section from which the basic amount is paid, and
(b) then to determine the part of the income within that section from which the basic amount is paid.
(1) This section has effect for the purposes of—
section 663 (the applicable rate for grossing up basic amounts of estate income),
section 670 (applicable rate for determining assumed income entitlement (UK estates)), and
section 679 (income from which basic amounts are treated as paid).
(2) If the aggregate income of the estate includes a sum within subsection (3) or (4), the sum is treated as bearing income tax at the rate specified for it in that subsection.
(3) The following sums are treated as bearing income tax at the dividend ordinary rate—
(a) a sum charged under Chapter 3 of Part 4 (dividends etc. from UK resident companies etc.), or
(b) a sum that is part of the aggregate income of the estate because of falling within—
(i) section 664(2)(c) (stock dividends), or
(ii) section 664(2)(d) (release of loan to participator in close company where debt due from personal representatives).
(4) A sum that is part of the aggregate income of the estate because of falling within section 664(2)(e) (gains from life insurance contracts etc.) is treated as bearing income tax at the lower rate.
(5) Income tax treated as borne under section 656(3) or 657(4) (gross amount of estate income treated as bearing tax at the applicable rate) is not repayable so far as the basic amount of the estate income in question is paid from sums within this section.
(1) For the purposes of this Chapter—
(a) a transfer of assets, or
(b) the appropriation of assets by personal representatives to themselves,
is treated as the payment of an amount equal to the assets' value at the date of transfer or appropriation.
(2) The set off or release of a debt is treated for the purposes of this Chapter as the payment of an amount equal to it.
(3) If at the end of the administration period—
(a) there is an obligation to transfer assets to any person, or
(b) personal representatives are entitled to appropriate assets to themselves,
an amount equal to the assets' value at that time is treated as payable then for the purposes of this Chapter.
(4) If at the end of the administration period—
(a) there is an obligation to release or set off a debt owed by any person, or
(b) personal representatives are entitled to release or set off a debt in their own favour,
a sum equal to the debt is treated as payable then for the purposes of this Chapter.
(1) This subsection applies if after the administration period ends it is apparent that a person is liable for income tax on estate income for any tax year who previously appeared not to be so liable or to be liable for tax on a lesser amount.
(2) If subsection (1) applies—
(a) the person may be assessed and taxed for the tax year, and
(b) any relief or additional relief to which the person may be entitled for the tax year is to be allowed if a claim is made.
(3) This subsection applies if after the administration period ends it is apparent that a person who previously appeared to be liable for income tax on estate income for any tax year is not so liable or is liable for tax on a lesser amount.
(4) If subsection (3) applies—
(a) all necessary adjustments and repayments of income tax for the tax year are to be made, and
(b) if the person has been allowed relief which exceeds the relief that could have been given by reference to the amount actually charged for the tax year, income tax is charged on the person for that year under this subsection on the excess.
(5) An assessment or adjustment made for the purposes of this Chapter or a claim made as a result of this Chapter may be made after the end of the period otherwise allowed if it is made on or before the third anniversary of the normal self-assessment filing date for the tax year in which the administration period ends.
(1) Income tax is charged under this Chapter on annual payments that are not charged to income tax under or as a result of any other provision of this Act or any other Act.
(2) Subsection (1) does not apply to annual payments that would be charged to income tax under or as a result of another provision but for an exemption.
(3) The frequency with which payments are made is ignored in determining whether they are annual payments for the purposes of this Chapter.
(4) For exemptions, see in particular—
(a) sections 727 to 730 (certain annual payments by individuals),
(b) section 731 (periodical payments of personal injury damages),
(c) section 732 (compensation awards),
(d) section 734 (payments from trusts for injured persons),
(e) sections 735 to 743 (health and employment insurance payments),
(f) sections 744 to 747 (payments to adopters),
(g) section 748 (payments by persons liable to pool betting duty),
(h) sections 757 to 767 (interest and royalty payments), and
(i) section 776 (scholarship income).
(1) Tax is charged under this Chapter on the full amount of the annual payments arising in the tax year.
(2) Subsection (1) is subject to Part 8 (foreign income: special rules).
(3) The amount charged under this Chapter in the case of certain payments made by trustees in the exercise of a discretion is subject to section 687 of ICTA (grossing up of discretionary payments from trusts).
The person liable for any tax charged under this Chapter is the person receiving or entitled to the annual payments.
(1) Income tax deducted under either of the following sections from an annual payment within this Chapter is treated as income tax paid by the recipient—
section 348(1)(b) of ICTA (under which income tax may be deducted from some payments by the payer), and
section 349(1)(a) of that Act (under which income tax must be deducted from some payments by the payer).
(2) See also section 687(2) of that Act (sum treated as deducted from payments made under a discretionary trust treated as income tax paid by the person to whom the payment is made or the settlor).
(1) Income tax is charged under this Chapter on income from any source that is not charged to income tax under or as a result of any other provision of this Act or any other Act.
(2) Subsection (1) does not apply to annual payments.
(3) Subsection (1) does not apply to income that would be charged to income tax under or as a result of another provision but for an exemption.
(4) The definition of “income” in section 878(1) does not apply for the purposes of this section.
(5) For exemptions from the charge under this Chapter, see in particular—
section 768 (commercial occupation of woodlands), and
section 779 (gains on commodity and financial futures).
(1) Tax is charged under this Chapter on the full amount of the income arising in the tax year.
(2) Subsection (1) is subject to—
(a) Chapter 1 of Part 7 (which provides relief on income from the use of furnished accommodation in an individual’s only or main residence: see, in particular, sections 794 and 798),
(b) Chapter 2 of that Part (which provides relief on income from the provision by an individual of foster care: see, in particular, sections 814 and 817), and
(c) Part 8 (foreign income: special rules).
The person liable for any tax charged under this Chapter is the person receiving or entitled to the income.
Income Tax (Trading and Other Income) Act 2005