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HMRC internal manual

Trusts, Settlements and Estates Manual

Deceased persons: interests in residue: practical and computational aspects - special reliefs for higher rate taxpayers

There are two occasions when there is a special tax relief available only where the beneficiary is liable to tax at the higher rate.

First occasion

The first occasion is where part of the income is taken into account in computing both

  • the estate of the deceased for Inheritance Tax purposes, and
  • the income of the personal representatives for income tax purposes.

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Second occasion

The second occasion applies to years up to and including 1994-95. It is when the expenses allowable in computing the residuary income exceed the aggregate income for the year of payment.

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Relief under ITTOIA/S669

Income that accrued during the lifetime of the deceased but was paid after death is treated under Inheritance Tax rules as part of the estate of the deceased person. The same income is treated as part of the net statutory income of the estate and therefore enters into the computation of residuary income.

Where this happens, a residuary beneficiary who is liable to tax at the higher rate may claim a deduction from the residuary income of an amount equal to the Inheritance Tax applicable to the accrued income.

For advice on relief under ITTOIA/S669 refer to HMRC Administration of Estates Cardiff.