Commentary on Sections Part 10: Miscellaneous income Overview Section 954: Successive absolute interests
2401.This section explains the position where two or more absolute interests in the residue of an estate are held successively by different persons. It is based on sections 697(4) and (5), and 698(2) of ICTA. The corresponding rule for income tax is in section 671 of ITTOIA.
2402.Subsection (3) contains an ordering rule to ensure that all determinations under subsection (2) or section 955(2) are made in relation to the person with the earlier interest before the person with the later interest. This subsection has been inserted to make explicit what is already implicit in the source legislation.
2403.Subsection (4) provides a special rule where there are two or more absolute interests in the final accounting period. It is intended to ensure that it is the last absolute interest which is charged to tax on the assumed income entitlement, which will comprise all the residuary income, in the final accounting period. This is because the last absolute interest holder will receive the capital of the residue (and also all outstanding income in respect of it).
2404.Subsections (5) and (6) contain special rules where section 951 (reduction in share of residuary income of estate) applies and there are successive absolute interests. These subsections provide that the calculation under section 951(1)(a) and (b) is to be made by reference to all the absolute interests taken together. Then, after applying the reduction to the last absolute interest under section 951(2) and (3), any remaining excess is applied to the previous absolute interest holders working backwards from the beginning of the last interest. See Change 73 in Annex 1.