Income Tax (Trading and Other Income) Act 2005 section 672

Successive interests: assumed income entitlement of holder of absolute interest following limited interest

Section 672 deals with how the assumed income entitlement of a person holding an absolute interest in the residue of an estate is calculated where that absolute interest follows one or more limited interests held by different people.

• The section applies where successive interests in the residue of an estate are held by different persons and at least one absolute interest follows at least one limited interest, with each later interest arising when the previous one ceases otherwise than by death
• Two rules (Rule A and Rule B) determine whether the absolute interest holder has an assumed income entitlement and, if so, its amount
• Rule A treats the absolute interest holder's share of residuary income as if the absolute interest had existed throughout the entire period when any preceding limited interest was in place, effectively ignoring the limited interest
• Rule B requires that the basic amounts relating to the absolute interest include the basic amounts that related to any preceding limited interest, ensuring a cumulative calculation

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