ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL This change is in taxpayers’ favour in principle. But it is expected to have no practical effect as it is in line with current practice. Change 97: Charitable trusts: exemption for income from estates in administration: sections 537 and 539
This change provides an exemption to trustees of charitable trusts who are liable to income tax under section 659 of ITTOIA on estate income charged under section 649 of that Act, to the extent that the income is applied to the purposes of the charitable trust.
Estate income is income from property held by the personal representatives or administrators of the estate of a deceased person on behalf of the beneficiaries of the estate. The administrators are liable to income tax on the income.
Income of United Kingdom estates and United Kingdom source income of foreign estates is chargeable under section 649 of ITTOIA.
Foreign income of foreign estates (see section 651 of ITTOIA) is treated as arising from sources outside the United Kingdom (see section 658(2) of that Act) and is not chargeable under section 649 of that Act but falls to be dealt with in accordance with the rules applying to income from the particular source. And any relevant exemptions provided by Part 10 of this Act apply accordingly.
There is a long-standing HMRC practice of treating United Kingdom estate income received by charities as exempt, and of allowing repayment claims in such cases. This change puts this on an explicit statutory basis.