Income Tax (Trading and Other Income) Act 2005 section 671

Successive absolute interests

Section 671 deals with the tax treatment of estate residuary income where two or more people hold absolute interests in the same part of the residue of an estate one after another during the administration period.

• Where successive absolute interests arise, a later holder's share of residuary income and basic amounts are treated as including those of any previous holder, ensuring continuity across the chain of interests
• Determinations for earlier interest holders must always be completed before those for later holders, and in the final tax year a previous holder is taxed as though it were not the final year, so that the last holder bears the charge on the full assumed income entitlement
• Any reduction in the share of residuary income at the end of the administration period is calculated by reference to all the successive absolute interests taken together, with any excess reduction applied backwards through the chain of previous holders
• Two interests count as successive even if one does not immediately follow the other, and every holder is assumed to be liable to income tax for the purposes of these rules