Income Tax (Trading and Other Income) Bill

House of Commons

Session 2004 - 05
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Other Bills before Parliament

Income Tax (Trading and Other Income) Bill

Income Tax (Trading and Other Income) Bill
Part 5 — Miscellaneous income
Chapter 6 — Beneficiaries’ income from estates in administration
296

676
Apportionments
(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
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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),
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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
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section 675 (basic amount of estate income: successive limited interests).
Relief where foreign estates have borne UK income tax
677
Relief where UK income tax borne by foreign estate: absolute interests
(1)
This section applies if—
(a)
an estate is a foreign estate in relation to a tax year,
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(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.
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(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
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United Kingdom income tax for the tax year, and
B is the aggregate income of the estate for the tax year.
678
Relief where UK income tax borne by foreign estate: limited and
discretionary interests
(1)
This section applies if—
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(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

Income Tax (Trading and Other Income) Bill
Part 5 — Miscellaneous income
Chapter 6 — Beneficiaries’ income from estates in administration
297

(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
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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,
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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.
General
679
Income from which basic amounts are treated as paid
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(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
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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
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(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
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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
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the basic amount is paid.
680
Income treated as bearing income tax
(1)
This section has effect for the purposes of—

Income Tax (Trading and Other Income) Bill
Part 5 — Miscellaneous income
Chapter 6 — Beneficiaries’ income from estates in administration
298

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).
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(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—
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(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
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(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.
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(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.
681
Transfers of assets etc. treated as payments
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(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.
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(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
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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
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(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.

Income Tax (Trading and Other Income) Bill
Part 5 — Miscellaneous income
Chapter 7 — Annual payments not otherwise charged
299

682
Assessments, adjustments and claims after the administration period
(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—
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(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
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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
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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
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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.
Chapter 7
Annual payments not otherwise charged
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683
Charge to tax on annual payments not otherwise charged
(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
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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),
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(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),
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(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).