|
| |
|
940 | Discretionary interests in residue |
| |
(1) | Income is treated as arising in an accounting period from a company’s |
| |
discretionary interest in the whole or part of the residue of an estate if a |
| |
payment is made in the accounting period in exercise of the discretion in the |
| |
| 5 |
(2) | Income treated as arising as a result of this section is estate income for the |
| |
purposes of this Chapter. |
| |
| |
| |
(1) | In the case of a UK estate, tax is charged under section 934 on the amount of |
| 10 |
estate income treated as arising in the accounting period. |
| |
(2) | That amount is the basic amount of that income for the accounting period (see |
| |
subsection (4)), grossed up by reference to the applicable rate for the relevant |
| |
tax year (see section 946). |
| |
(3) | The gross amount is treated as having borne income tax by deduction at that |
| 15 |
| |
(4) | In this Chapter “the basic amount”, in relation to estate income, has the |
| |
| |
(a) | section 943 (basic amount of estate income: absolute interests), |
| |
(b) | section 944 (basic amount of estate income: limited interests), |
| 20 |
(c) | section 945 (basic amount of estate income: discretionary interests), and |
| |
(d) | section 958 (basic amount of estate income: successive limited |
| |
| |
| |
(1) | In the case of a foreign estate, tax is charged under section 934 on the amount |
| 25 |
of estate income treated as arising in the accounting period. |
| |
(2) | That amount depends on whether the estate income arising in the accounting |
| |
period is paid from sums within section 963(3) or (4) (sums treated as bearing |
| |
| |
(3) | So far as the estate income is paid from such sums, that amount is the basic |
| 30 |
amount of that income for the accounting period grossed up by reference to the |
| |
applicable rate for the relevant tax year (see section 946). |
| |
(4) | That gross amount is treated as having borne income tax by deduction at that |
| |
| |
(5) | So far as the estate income is not paid from sums within section 963(3) or (4), |
| 35 |
the amount of estate income treated as arising in the accounting period is the |
| |
basic amount of that income for that period. |
| |
|
| |
|
| |
|
Basic amount of estate income: general calculations rules |
| |
| |
(1) | The basic amount of estate income relating to a company’s absolute interest in |
| |
the whole or part of the residue of an estate for an accounting period before the |
| |
final accounting period is the lower of— |
| 5 |
(a) | the total of all sums paid in the accounting period in respect of that |
| |
| |
(b) | the amount of the company’s assumed income entitlement for the |
| |
accounting period in respect of it. |
| |
(2) | The basic amount for the final accounting period is equal to the amount of the |
| 10 |
company’s assumed income entitlement for that accounting period in respect |
| |
| |
(3) | But if the residuary income of the estate for the final tax year is nil because the |
| |
allowable estate deductions exceed the aggregate income of the estate, the |
| |
basic amount for the final accounting period is reduced— |
| 15 |
(a) | where the company has an absolute interest in the whole of the residue |
| |
of the estate, by an amount equal to the excess, and |
| |
(b) | in any other case, by an amount equal to such part of the excess as is just |
| |
| |
(4) | See sections 948 to 952 for the meaning of references to assumed income |
| 20 |
entitlement and residuary income of an estate. |
| |
(5) | See sections 947 and 949(2) for the meaning of aggregate income of an estate |
| |
and allowable estate deductions respectively. |
| |
(6) | This section is subject to sections 953 to 956 (successive interests). |
| |
| 25 |
(1) | The basic amount of estate income relating to a company’s limited interest in |
| |
the whole or part of the residue of an estate for an accounting period is the total |
| |
of the sums within section 939(2)(b), (3)(c) and (4)(c) for that period. |
| |
(2) | This does not apply, and section 958 applies instead, if the limited interest is |
| |
one to which section 957 (successive interests: holders of limited interests) |
| 30 |
| |
945 | Discretionary interests |
| |
The basic amount of estate income relating to a company’s discretionary |
| |
interest in the whole or part of the residue of an estate for an accounting period |
| |
is the total of the payments made in the accounting period in exercise of the |
| 35 |
discretion in favour of the company. |
| |
946 | Applicable rate for grossing up basic amounts of estate income |
| |
(1) | The applicable rate by reference to which a basic amount of estate income is |
| |
grossed up for the purposes of sections 941 and 942 depends on the rate at |
| |
which income tax is borne by the aggregate income of the estate for the relevant |
| 40 |
tax year (see subsection (5)). |
| |
|
| |
|
| |
|
(2) | If the aggregate income of the estate all bears income tax at the same rate, the |
| |
applicable rate is that rate. |
| |
| |
(a) | different parts of the aggregate income of the estate bear income tax at |
| |
| 5 |
(b) | the same rate applies to all the income from which section 962 treats the |
| |
basic amount as having been paid, |
| |
| the applicable rate is that rate. |
| |
| |
(a) | different parts of the aggregate income of the estate bear income tax at |
| 10 |
| |
(b) | different rates apply to different parts of the income from which section |
| |
962 treats the basic amount as having been paid, |
| |
| each of those rates is the applicable rate by reference to which the |
| |
corresponding part of the basic amount is grossed up. |
| 15 |
(5) | In this Chapter “the relevant tax year” in relation to an amount of estate |
| |
income, means the tax year in which the amount of estate income would be |
| |
| |
(a) | the references in this Chapter to accounting periods were references to |
| |
| 20 |
(b) | section 950(3) (apportionment between accounting periods) were |
| |
| |
947 | Aggregate income of the estate |
| |
(1) | For the purposes of this Chapter the aggregate income of the estate for a tax |
| |
year is the total of the income and amounts specified in subsection (2), but |
| 25 |
excluding the income specified in subsection (5). |
| |
(2) | The income and amounts are— |
| |
(a) | the income of the deceased’s personal representatives in that capacity |
| |
which is charged to United Kingdom income tax for the tax year, |
| |
(b) | the income of the deceased’s personal representatives in that capacity |
| 30 |
on which such tax would have been charged for the tax year if— |
| |
(i) | it was income of a UK resident who was ordinarily UK resident, |
| |
| |
(ii) | it was income from a source in the United Kingdom, |
| |
(c) | any amount of income treated as arising to the personal representatives |
| 35 |
under section 410(4) (stock dividends) of ITTOIA that would be |
| |
charged to income tax under Chapter 5 of Part 4 of that Act if income |
| |
arising to personal representatives were so charged (see section 411 of |
| |
| |
(d) | in a case where section 419(2) of ITTOIA applies (release of loans to |
| 40 |
participator in close company: loans and advances to persons who die), |
| |
the amount that would be charged to income tax under Chapter 6 of |
| |
Part 4 of that Act apart from that section, and |
| |
(e) | any amount that would have been treated as income of the personal |
| |
representatives in that capacity under section 466 of ITTOIA if the |
| 45 |
condition in section 466(2) had been met (gains from contracts for life |
| |
| |
|
| |
|
| |
|
(3) | In calculating the amount of the income within subsection (2)(a), any allowable |
| |
deductions are to be taken into account. |
| |
(4) | In calculating the amount of the income within subsection (2)(b), any |
| |
deductions which would be allowable if the income had been charged to |
| |
United Kingdom income tax are to be deducted from the full amount of the |
| 5 |
income actually arising in the tax year. |
| |
(5) | The excluded income is— |
| |
(a) | income to which any person is or may become entitled under a specific |
| |
| |
(b) | income from property devolving on the personal representatives |
| 10 |
otherwise than as assets for payment of the deceased’s debts. |
| |
(6) | In subsection (5)(a) “specific disposition” means a gift of specific property |
| |
| |
(a) | the disposition of personal chattels by section 46 of the Administration |
| |
of Estates Act 1925 (c. 23) (succession on intestacy), and |
| 15 |
(b) | any disposition which under the law of another country has a similar |
| |
effect to a gift of specific property by will under the law of England and |
| |
| |
| but excluding real property included in a residuary gift made by will by a |
| |
specific or general description of it or, in Scotland, heritable estate included in |
| 20 |
| |
Further provisions for calculating estate income relating to absolute interests |
| |
948 | Assumed income entitlement |
| |
(1) | Whether a company has an assumed income entitlement for an accounting |
| |
period in respect of an absolute interest in the whole or part of the residue of |
| 25 |
an estate depends on the results of the following steps. |
| |
| |
| Find the amount of the company’s share of the residuary income of the estate |
| |
that is attributable to that interest for that accounting period and each previous |
| |
accounting period during which the company had that interest (see sections |
| 30 |
| |
| |
| If the estate is a UK estate in relation to any tax year by reference to which the |
| |
amount of that share for any accounting period is determined under section |
| |
950, deduct from that amount income tax on that amount at the applicable rate |
| 35 |
for that year (see section 952). |
| |
| |
| Add together the amounts found under step 1 after making any deductions |
| |
| |
| 40 |
| Add together the basic amounts relating to the company’s absolute interest in |
| |
respect of which the company was liable for corporation tax for all previous |
| |
accounting periods (or would have been so liable if the company had been a |
| |
company liable for corporation tax for those accounting periods). |
| |
|
| |
|
| |
|
(2) | For the purposes of this Chapter the company has an assumed income |
| |
entitlement for the accounting period if the amount resulting from step 3 |
| |
exceeds the amount resulting from step 4. |
| |
(3) | The assumed income entitlement is equal to the excess. |
| |
(4) | This section is subject to— |
| 5 |
section 954 (successive absolute interests), and |
| |
section 955 (successive interests: assumed income entitlement of holder of |
| |
absolute interest following limited interest). |
| |
949 | Residuary income of the estate |
| |
(1) | For the purposes of this Chapter the residuary income of an estate for a tax year |
| 10 |
is the aggregate income of the estate for that year, less the allowable estate |
| |
deductions for that year. |
| |
(2) | The allowable estate deductions for a tax year are— |
| |
(a) | all interest paid in that year by the personal representatives in that |
| |
capacity (but see section 233(3) of IHTA 1984: exclusion of interest on |
| 15 |
| |
(b) | all annual payments for that year which are properly payable out of |
| |
| |
(c) | all payments made in that year in respect of expenses incurred by the |
| |
personal representatives in that capacity in the management of the |
| 20 |
assets of the estate, and |
| |
(d) | any excess deductions from the previous tax year. |
| |
| This is subject to subsections (3) to (5). |
| |
(3) | No sum is to be treated as an allowable estate deduction if it is allowable in |
| |
calculating the aggregate income of the estate. |
| 25 |
(4) | No sum is to be counted twice as an allowable estate deduction. |
| |
(5) | Payments in respect of expenses are only allowable estate deductions if they |
| |
are properly chargeable to income (ignoring any specific direction in a will). |
| |
(6) | In this section “excess deductions from the previous tax year” means so much |
| |
of the allowable deductions for the previous tax year as exceeded the aggregate |
| 30 |
income of the estate for that year. |
| |
950 | Shares of residuary income of estate |
| |
(1) | In the case of a company which has an absolute interest in the whole of the |
| |
residue of an estate for a whole tax year, the company’s share of the residuary |
| |
income of the estate in respect of that interest for that year is equal to the whole |
| 35 |
of that income for that year. |
| |
(2) | In the case of a company which— |
| |
(a) | has an absolute interest in the whole of the residue of an estate for part |
| |
| |
(b) | an absolute interest in part of the residue of an estate for the whole or |
| 40 |
| |
| the company’s share of the residuary income of the estate for that year is a |
| |
proportionate part of that income for that year. |
| |
|
| |
|
| |
|
(3) | The company’s share of the residuary income of an estate in respect of an |
| |
absolute interest for each of the accounting periods (if more than one) |
| |
comprising a tax year is found by apportioning the company’s share of the |
| |
residuary income of the estate for that year between the accounting periods. |
| |
(4) | Subsections (1) and (2) are subject to section 951 (reduction in share of |
| 5 |
residuary income of estate). |
| |
951 | Reduction in share of residuary income of estate |
| |
(1) | This section applies if a company has an absolute interest in the whole or part |
| |
of the residue of an estate at the end of the administration period and— |
| |
(a) | the total of the company’s shares of the residuary income of the estate |
| 10 |
in respect of that interest for all tax years (apart from this section), |
| |
| |
(b) | the total of all sums paid during or payable at the end of the |
| |
administration period in respect of that interest to any person (grossed |
| |
up where subsection (5) applies). |
| 15 |
(2) | In the final accounting period the company’s share of the residuary income of |
| |
the estate is to be reduced by that excess. |
| |
(3) | If that excess is greater than the company’s share of that income for the final |
| |
accounting period, the company’s share of that income for the previous |
| |
accounting period is to be reduced, and so on. |
| 20 |
(4) | If subsection (3) applies, all necessary adjustments and repayments of |
| |
corporation tax are to be made. |
| |
(5) | For the purposes of calculating the total mentioned in subsection (1)(b)— |
| |
(a) | if the estate is a UK estate in relation to a tax year in which a sum is paid, |
| |
the sum is to be grossed up by reference to the basic rate for that year, |
| 25 |
| |
(b) | if the estate is a UK estate in relation to the final tax year, a sum payable |
| |
at the end of the administration period is to be grossed up by reference |
| |
to the basic rate for that year. |
| |
(6) | For the application of this section where two or more absolute interests in the |
| 30 |
whole or the same part of the residue are held successively by different |
| |
persons, see section 954(5) and (6). |
| |
952 | Applicable rate for determining assumed income entitlement (UK estates) |
| |
(1) | The applicable rate by reference to which income tax on a company’s share of |
| |
the residuary income of the estate is calculated for the purposes of step 2 of the |
| 35 |
calculation in section 948(1) depends on the rate at which income tax is borne |
| |
by the aggregate income of the estate for the tax year in question. |
| |
(2) | If the aggregate income of the estate all bears income tax at the same rate, the |
| |
applicable rate is that rate. |
| |
(3) | If different parts of the aggregate income of the estate bear income tax at |
| 40 |
different rates, the applicable rate is the rate that applies to the income to which |
| |
the company’s share of the residuary income of the estate relates. |
| |
|
| |
|
| |
|
(4) | If different rates apply to different parts of that income, each of those rates is |
| |
the applicable rate that applies to the corresponding part of the income to |
| |
which the company’s share of the residuary income of the estate relates. |
| |
(5) | For the purposes of this section, if there is more than one person with an |
| |
absolute interest in the residue of the estate, such apportionments of parts of |
| 5 |
the aggregate income of the estate bearing income tax at different rates are to |
| |
be made as are just and reasonable for their different interests. |
| |
(6) | Section 650(1) of ITTOIA 2005 (absolute interests) applies for the purposes of |
| |
subsection (5) in the case of any person who is not a company chargeable to |
| |
| 10 |
| |
| |
(1) | Sections 954 to 959 relate to cases where two or more interests in the whole or |
| |
part of the residue of an estate are held successively during the administration |
| |
period by different persons. |
| 15 |
(2) | For the purposes of this section and those sections, two interests are held |
| |
successively even where one is not held immediately before or after the other. |
| |
(3) | It is assumed for the purposes of those sections— |
| |
(a) | that each of the persons holding the interests in question is a company |
| |
within the charge to corporation tax (but without prejudice to the |
| 20 |
references to interests ceasing otherwise than by death), and |
| |
(b) | that in the case of a person who is not a company the person’s |
| |
accounting periods correspond with tax years. |
| |
954 | Successive absolute interests |
| |
(1) | This section applies if two or more absolute interests in the whole or part of the |
| 25 |
residue of an estate are held successively during the administration period by |
| |
| |
(2) | In determining whether a company with a later such interest (“the later |
| |
holder”) has an assumed income entitlement in respect of that interest and, if |
| |
| 30 |
(a) | the later holder’s share of the residuary income of the estate in respect |
| |
of that interest for any accounting period is to be treated as including |
| |
the share of any person with a previous such interest (“a previous |
| |
| |
(b) | the basic amounts relating to the later holder’s interest are to be treated |
| 35 |
as including the basic amounts relating to any previous such interest. |
| |
(3) | In applying subsection (2), all determinations under that subsection or section |
| |
955(2) that fall to be made in relation to a person with an earlier interest are to |
| |
be made before determinations under those provisions relating to a person |
| |
| 40 |
(4) | A company which is a previous holder in the final accounting period is to be |
| |
taxed for that period, in relation to the interest as to which that company is a |
| |
previous holder, as if that period were not the final accounting period, and the |
| |
later holder’s assumed income entitlement is to be calculated accordingly (or, |
| |
|
| |
|