Corporation Tax Act 2009 section 956

Payments in respect of limited interests followed by absolute interests

Section 956 deals with how payments relating to an earlier limited interest in an estate are taxed when they are received by a company that holds a later absolute interest in the same estate.

• Where successive interests in an estate's residue are held by different persons, each arising on the cessation of the previous one (other than by death), and the sequence includes at least one limited interest followed by at least one absolute interest, special rules apply to payments due from the earlier limited interest.
• While the company holds the absolute interest, any sum it receives that relates to the earlier limited interest is treated as though it were paid in respect of the absolute interest, meaning it can form part of the basic amount of estate income in accounting periods before the final period.
• If the company's absolute interest itself ceases during the administration period, any sum relating to the earlier limited interest that is paid after that cessation (or remains outstanding at the end of the administration period) is instead treated under the limited interest rules — as if the limited interest had continued throughout the period the absolute interest existed and had been held by the company.
• However, for the specific purpose of calculating any reduction in the company's share of residuary income of the estate under section 951, those sums are still treated as paid or payable in respect of the absolute interest.