800 Limited interest in residue

Summary

This section sets out the procedure for taxing beneficiaries with a limited interest in the residue of a deceased person’s estate. Such a beneficiary whose interest extends to the whole of the residue is entitled to receive the balance of the income of the estate after deducting any income used to pay annuities provided for in the will, interest payable on legacies, debts of the estate and the expenses of the personal representatives which are chargeable against income. Where the beneficiary has a limited interest in part only of the residue, he/she receives a corresponding part of the balance of the full income as so computed.

Details

(1) The section applies to a beneficiary who has a limited interest in the residue or part of the residue of an estate of a deceased person, during the period of administration of the deceased person’s estate (that is, the period starting on the death of the person and ending on the completion of the administration of his/ her estate).

(2) Any sum paid to such a beneficiary during the administration period is treated as paid to that person as income for the tax year in which the payment is made. If the limited interest of the beneficiary has ceased when the payment is made, the payment is treated as made in the last tax year in which the interest subsisted.

When the administration period is complete, the total interim payments received by the beneficiary during the administration period and the amounts paid on completion of that period to the beneficiary are aggregated and apportioned on a day to day basis over the administration period. The payments are then treated as income of the beneficiary in the tax year in which they are so treated as accruing.

(3) The charge to tax already made in respect of the interim payments is recalculated to take account of any final payment paid on the completion of the administration of the estate.

(4) Payments to a beneficiary are treated as having been received after tax at the standard rate has been deducted, where the payment is from an Irish estate. In assessing the payments for income tax purposes, the payments received are regrossed at the standard rate of tax. Credit is allowable for any tax deemed to have been paid.

In the case of a foreign estate, the payments are treated as income chargeable under Case III, Schedule D.

(5) Where a beneficiary is charged to Irish income tax on income in respect of an interest in a foreign estate, and any part of the aggregate income of the estate has borne Irish income tax, the amount of that income charged to Irish tax may be reduced in the same proportion as the Irish income from the estate which has borne Irish tax bears to the whole aggregate income of the estate.

(6) Where a beneficiary’s income is reduced as at subsection (5), the amount by which it is reduced is treated as income from which income tax at the standard rate has been deducted, for the purposes of computing the beneficiary’s total income.

Relevant Date: Finance Act 2021