Income Tax (Trading and Other Income) Act 2005 section 677

Relief where UK income tax borne by foreign estate: absolute interests

Section 677 provides relief from double taxation where a beneficiary with an absolute interest in the residue of a foreign estate is charged UK income tax on estate income, but part of the estate's aggregate income has already borne UK income tax.

• The section applies where an estate is classified as a foreign estate for a tax year and UK income tax has been charged on a beneficiary's estate income arising under an absolute interest in the residue
• Relief is available on a claim basis: the beneficiary must make a claim to receive the reduction in their income tax liability
• The relief is calculated using the formula T × A / B, where T is the tax charged on the beneficiary, A is the portion of the estate's aggregate income that has already borne UK tax, and B is the total aggregate income of the estate for the year
• The effect of the formula is to reduce the beneficiary's tax bill proportionately, reflecting the share of the estate's income on which UK tax has already been paid