Income Tax (Trading and Other Income) Act 2005 section 652

Estate income: absolute interests in residue

Section 652 sets out when estate income is treated as arising in a tax year where a beneficiary holds an absolute interest in the whole or part of the residue of an estate in administration.

• A beneficiary with an absolute interest in the residue of an estate is treated as receiving estate income in a tax year if they have an assumed income entitlement for that year and either a payment is made in respect of the interest during that year (before the administration period ends) or it is the final tax year of the administration period.
• In the final tax year of the administration, no actual payment needs to have been made — the beneficiary is still treated as having estate income because the net amount of estate income in that year is always equal to the assumed income entitlement for that year.
• The assumed income entitlement is the mechanism used to calculate how much estate income arises in each tax year, replacing the older approach under previous legislation which relied on actual and fictional payments to determine the tax charge.
• Any income treated as arising under this section is classified as estate income for the purposes of the wider rules on taxing beneficiaries of estates in administration.