Corporation Tax Bill

House of Commons

Session 2008 - 09
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Corporation Tax Bill

Corporation Tax Bill
Part 10 — Miscellaneous income
Chapter 3 — Beneficiaries’ income from estates in administration
451

where the previous holder is not a company, having regard to the application
of section 671(4) of ITTOIA 2005 to the previous holder).
(5)
The calculation under section 951(1)(a) and (b) (amount of reduction in the
share of the residuary income of the company with an absolute interest at the
end of the administration period) is to be made by reference to all the absolute
5
interests taken together.
(6)
If the amount resulting from that calculation is greater than the total amount of
the reductions which can be made under section 951(2) and (3), the share of the
residuary income of the estate of the last previous holder of the interest for the
last accounting period in which that last holder had that interest is to be
10
reduced, and so on.
(7)
But if subsection (6) applies in a case where the last previous holder or any
earlier previous holder is not a company, in applying that subsection regard
must be had to the application of section 671(6) of ITTOIA 2005 to the previous
holder.
15
955
Assumed income entitlement of holder of absolute interest following limited
interest
(1)
This section applies if—
(a)
two or more interests in the whole or part of the residue of an estate are
held successively during the administration period by different
20
persons,
(b)
each later interest arises or is created on the cessation of the previous
interest otherwise than by death,
(c)
at least one of the interests is an absolute interest, and
(d)
at least one of the interests preceding that interest is a limited interest.
25
(2)
Rules A and B apply to determine in relation to such an absolute interest—
(a)
whether the company with the interest has an assumed income
entitlement in respect of the interest, and
(b)
if so, its amount.
(3)
Rule A is that the company’s share of the residuary income of the estate in
30
respect of the absolute interest for any accounting period is treated as including
any amount which would be included in it if—
(a)
the interest had subsisted throughout the period when any such limited
interest subsisted, and
(b)
no such limited interest had ever subsisted.
35
(4)
Rule B is that the basic amounts relating to the absolute interest are treated as
including the basic amounts relating to any such limited interest.
956
Payments in respect of limited interests followed by absolute interests
(1)
This section applies if—
(a)
two or more interests in the whole or part of the residue of an estate are
40
held successively during the administration period by different
persons,
(b)
each later interest arises or is created on the cessation of the previous
interest otherwise than by death,
(c)
at least one of the interests is an absolute interest, and
45

Corporation Tax Bill
Part 10 — Miscellaneous income
Chapter 3 — Beneficiaries’ income from estates in administration
452

(d)
at least one of the interests preceding that interest is a limited interest.
(2)
A sum to which a company (“C”) with such an absolute interest is entitled in
respect of any such limited interest which is paid while C has the absolute
interest is treated as paid in respect of the absolute interest (and not the limited
interest).
5
(3)
Subsection (4) applies if—
(a)
C’s absolute interest ceases during the administration period, and
(b)
a sum to which C is entitled in respect of any such limited interest—
(i)
is paid after the absolute interest ceases but before the end of the
administration period, or
10
(ii)
remains payable at the end of it.
(4)
This Chapter applies as respects any such sum as if the limited interest had
continued to subsist while that absolute interest subsisted and had been held
by C.
(5)
Subsection (4) is subject to subsection (6).
15
(6)
For the purposes only of section 951 (reduction in share of residuary income of
estate), any such sum is treated as paid or payable in respect of the absolute
interest.
957
Holders of limited interests
(1)
This section applies if—
20
(a)
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,
(b)
the earlier or, if there are more than two, the earliest of the interests is a
limited interest, and
25
(c)
each later interest arises or is created on the cessation of the previous
interest otherwise than by death.
(2)
Income is treated as arising from a limited interest in the whole or part of the
residue of the estate in an accounting period in cases A, B and C.
(3)
Case A is where—
30
(a)
one of the successive interests subsists at the beginning of the
accounting period of a company which has or has had one of the
interests which is a limited interest (the “limited holder”),
(b)
a sum is paid in respect of one of the interests in that period and before
the end of the administration period, and
35
(c)
the limited holder is entitled to receive the payment.
(4)
Case B is where—
(a)
the accounting period of a limited holder is the final accounting period,
(b)
one of the successive interests subsists at the beginning of that period,
(c)
a sum remains payable in respect of one of the interests at the end of the
40
administration period, and
(d)
the limited holder is entitled to receive the payment.
(5)
Case C is where—

Corporation Tax Bill
Part 10 — Miscellaneous income
Chapter 3 — Beneficiaries’ income from estates in administration
453

(a)
the accounting period of a limited holder is a period before the final
accounting period,
(b)
the last of the successive interests ceases in the accounting period,
(c)
a sum is either—
(i)
paid in respect of one of the interests in a later accounting
5
period but before the end of the administration period, or
(ii)
remains payable in respect of it at the end of the administration
period, and
(d)
the limited holder is entitled to receive the payment.
958
Basic amount of estate income: successive limited interests
10
The basic amount of estate income relating to a limited interest within section
957 for an accounting period is the total of the sums within section 957(3)(b),
(4)(c) and (5)(c) for that period.
959
Apportionments
(1)
Such apportionments as are just and reasonable are to be made for the
15
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
20
(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 954 (successive absolute interests),
section 955 (successive interests: assumed income entitlement of holder of
25
absolute interest following limited interest),
section 956 (successive interests: payments in respect of limited interests
followed by absolute interests),
section 957 (successive interests: holders of limited interest) and,
section 958 (basic amount of estate income: successive limited interests).
30
Relief where foreign estates have borne UK income tax
960
Relief in respect of tax relating to absolute interests
(1)
This section applies if—
(a)
United Kingdom corporation tax has been charged on a company for an
accounting period on estate income treated as arising from an estate
35
under section 937 (estate income: absolute interests in residue),
(b)
the estate is a foreign estate in relation to the relevant tax year, and
(c)
United Kingdom income tax has already been borne by part of the
aggregate income of the estate for the relevant tax year.

Corporation Tax Bill
Part 10 — Miscellaneous income
Chapter 3 — Beneficiaries’ income from estates in administration
454

(2)
If the company makes a claim under this section, the corporation tax charged
on the company on that estate income is to be reduced by an amount equal to—

where—
T is the corporation tax charged on the company,
A is so much of the aggregate income of the estate as has already borne
5
United Kingdom income tax for the relevant tax year, and
B is the aggregate income of the estate for the relevant tax year.
961
Relief in respect of tax relating to limited or discretionary interests
(1)
This section applies if—
(a)
United Kingdom corporation tax has been charged on a company for an
10
accounting period on estate income from an estate treated as arising
under—
(i)
section 939 (estate income: limited interests in residue), or
(ii)
section 940 (estate income: discretionary interests in residue),
(b)
the estate is a foreign estate in relation to the relevant tax year, and
15
(c)
United Kingdom income tax has already been borne by part of the
aggregate income of the estate for the relevant tax year.
(2)
If the company makes a claim under this section, the corporation tax charged
on the company on that estate income is to be reduced by an amount equal to

where—
20
T is the corporation tax charged on the company,
A is so much of the aggregate income of the estate as has already borne
United Kingdom income tax for the relevant tax year,
B is the aggregate income of the estate for the relevant tax year, and
C is the amount of United Kingdom income tax already borne by the
25
aggregate income of the estate for the relevant tax year.
General
962
Income from which basic amounts are treated as paid
(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.
30
(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
35
order—

Corporation Tax Bill
Part 10 — Miscellaneous income
Chapter 3 — Beneficiaries’ income from estates in administration
455

(a)
income bearing income tax at the basic rate, and
(b)
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 963 as bearing income tax, assumption C is applied before
assumptions A and B.
5
(5)
Assumption C is that the basic amount is paid from income that is not within
section 963 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
10
(b)
then to determine the part of the income within that section from which
the basic amount is paid.
963
Income treated as bearing income tax
(1)
This section has effect for the purposes of—
section 946 (the applicable rate for grossing up basic amounts of estate
15
income),
section 952 (applicable rate for determining assumed income entitlement
(UK estates)), and
section 962 (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),
20
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 of ITTOIA 2005 (dividends etc.
25
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 947(2)(c) (stock dividends), or
(ii)
section 947(2)(d) (release of loan to participator in close
30
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 947(2)(e) (gains from life insurance contracts etc.) is treated as
bearing income tax at the basic rate.
(5)
Income tax treated as borne under section 941(3) or 942(4) (gross amount of
35
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.
964
Transfers of assets etc treated as payments
(1)
For the purposes of this Chapter—
40
(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.

Corporation Tax Bill
Part 10 — Miscellaneous income
Chapter 3 — Beneficiaries’ income from estates in administration
456

(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
5
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
10
(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.
965
Assessments, adjustments and claims after the administration period
15
(1)
This subsection applies if after the administration period ends it is apparent
that a company is liable for corporation tax on estate income for any accounting
period for which it previously appeared not to be so liable or to be liable for tax
on a lesser amount.
(2)
If subsection (1) applies—
20
(a)
the company may be assessed and taxed for the accounting period, and
(b)
any relief or additional relief to which the company may be entitled for
the accounting period is to be allowed if a claim is made.
(3)
This subsection applies if after the administration period ends it is apparent
that a company which previously appeared to be liable for corporation tax on
25
estate income for any accounting period 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 corporation tax for the
accounting period are to be made, and
30
(b)
if the company has been allowed relief which exceeds the relief that
could have been given by reference to the amount actually charged for
the accounting period, the excess is to be treated as chargeable for that
accounting period under the charge to corporation tax on income.
(5)
An assessment or adjustment made for the purposes of this Chapter or a claim
35
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 31
January following the accounting period in which the administration period
ends.
966
Power to obtain information from personal representatives and beneficiaries
40
(1)
An officer of Revenue and Customs may by notice require a person within
subsection (2) to provide the officer with such particulars as the officer thinks
necessary for the purposes of this Chapter.
(2)
A person is within this subsection if—

Corporation Tax Bill
Part 10 — Miscellaneous income
Chapter 4 — Income from holding an office
457

(a)
the person is or has been a personal representative, or
(b)
the person has or has had an absolute or limited interest in the whole or
part of the residue of the deceased person’s estate.
(3)
The notice must specify the period within which the particulars must be
provided.
5
(4)
That period must be at least 28 days.
967
Statements relating to estate income
(1)
If a company within subsection (2) requests it in writing, a personal
representative of a deceased person must provide the company with a
statement showing—
10
(a)
the amount treated as estate income arising from the company’s
interest in the whole or part of the deceased person’s estate for which
the company is liable to corporation tax for an accounting period, and
(b)
the amount of any tax at the applicable rate which any such amount is
treated as having borne.
15
(2)
A company is within this subsection if—
(a)
it has or has had an absolute or limited interest in the whole or part of
the residue of the estate, or
(b)
estate income has arisen to it from a discretionary interest it has or has
had in the whole or part of the residue of the estate.
20
(3)
A statement under subsection (1) must be in writing.
(4)
The duty to comply with a request under this section is enforceable by the
company which made it.
Supplementary
968
Meaning of “personal representatives”
25
In this Chapter “personal representatives”, in relation to a person who has
died, means—
(a)
in the United Kingdom, persons responsible for administering the
estate of the deceased, and
(b)
in a territory outside the United Kingdom, those persons having
30
functions under its law equivalent to those of administering the estate
of the deceased.
Chapter 4
Income from holding an office
969
Charge to tax on income from holding an office
35
(1)
The charge to corporation tax on income applies to income from the holding of
an office.
(2)
The amount of any income charged to tax under this section is to be calculated
in accordance with income tax principles and all questions as to any of the