726. Position with regard to higher rate tax.

A bequest of an annuity1 free of income tax prima facie means free of all income tax, not just tax at the basic rate2. It is a gift to the annuitant of such a sum as will, after all issues as between the annuitant and the Crown in respect of income tax for that tax year have been determined, leave the annuitant with the sum mentioned3.

Where there was a covenant in a settlement to pay such sum as after deduction of income tax at the standard rate and of every other tax on income for the time being in