Income Tax (Trading and Other Income) Act 2005 section 674

Successive interests: holders of limited interests

Section 674 sets out how estate income is taxed where two or more different people hold successive interests in the residue of an estate during the administration period, the earliest interest being a limited interest, and each later interest arises on the cessation of the previous one otherwise than by death.

• Applies where two or more people hold successive interests in the residue of an estate, the earliest being a limited interest, and each subsequent interest arises on cessation of the prior interest other than by death
• Three cases (A, B and C) determine when estate income is treated as arising from a successive limited interest, mirroring the rules for single limited interests but adapted to recognise multiple holders in the chain
• Each case requires that a "limited holder" — someone who holds or has held one of the limited interests in the chain — is entitled to receive the relevant payment, because the recipient is not always the person in respect of whose interest the payment is made
• A new chain of succession begins with the first limited interest, so any preceding absolute interest is disregarded, and two limited interests preceded by a limited interest that ceased on death are also covered