Income Tax (Trading and Other Income) Act 2005 section 678

Relief where UK income tax borne by foreign estate: limited and discretionary interests

Section 678 provides a mechanism for reducing UK income tax charged on a beneficiary with a limited or discretionary interest in the residue of a foreign estate, where part of the estate's income has already borne UK income tax.

• Applies where an estate is classified as a foreign estate for a tax year and a beneficiary has been charged UK income tax on estate income arising from a limited or discretionary interest in residue
• Relief is only available where part of the estate's aggregate income has already borne UK income tax, and the beneficiary makes a claim
• The tax reduction is calculated using the formula T × (A − C) / (B − C), which gives a proportionate reduction reflecting the share of estate income that has already been taxed in the UK
• The reduction is given effect at Step 6 of the income tax calculation under section 23 of ITA 2007