Guidance

HS240 Lloyd's underwriters (2023)

Updated 6 April 2023

This helpsheet may be of interest to Lloyd’s underwriters and personal representatives filing pages on their behalf.

It gives additional information for both types of Lloyd’s pages: Lloyd’s underwriters (SA103L) and Trust and Estate income from membership of Lloyd’s (SA901L).

If the named individual has died during the tax year read the death paragraph below. This provides information as to which return will need to be completed.

Read the reference to ‘you’ as including a personal representative where appropriate.

1. Foreign tax

Foreign tax is paid in connection with your Lloyd’s results in 3 ways.

1. If any of your personal funds are invested abroad, foreign tax may be withheld when the interest, distribution and so on, is paid over to you — these sums are entered in boxes 13 and 16 on page LU 2 of the Lloyd’s underwriters pages or boxes 1L.19 and 1L.23 on page TLU 2 of the Trust and Estate income from membership of Lloyd’s tax return page.

2. In some dozen or so countries, tax is levied by the overseas tax authority by reference to the profits of syndicate business written by agents operating in those countries. Lloyd’s meets these tax bills centrally but the syndicate results reported to Names have been adjusted to include this tax.

3. Tax returns are made to the US and Canadian tax authorities of each Name’s Lloyd’s business in those 2 countries and Income Tax is levied on the reported profits. Lloyd’s deals with the returns and liabilities centrally and reports to Names annually the amount of US and Canadian taxes paid (or repaid) on their behalf. The amount to enter in boxes 44 and 45 or 1L.74 and 1L.75 is the US and Canadian tax paid.

Other Syndicate foreign tax paid should be entered in box 46 or 1L.76.

Where you’ve suffered foreign tax on income that’s also liable to United Kingdom (UK) tax, relief for the foreign tax may be allowed. This is either by giving credit for the amount of foreign tax paid against UK tax on the same income or where there is not enough UK tax due (or if the Name so chooses), relief may be given as a deduction in arriving at the net profit or loss. You cannot claim relief partly as a deduction and partly as tax credit.

2. Foreign pages 2022 to 2023

The instructions on pages FN 2 to FN 5 of the Foreign notes for completing Columns A, C, E and F at the top of page F 6 do not apply to claiming tax credit relief for the foreign tax paid on your Lloyd’s profits. This is because of the pooling basis that applies for Lloyd’s foreign tax, which means it’s not necessary to identify separately the country in which the foreign tax is paid or branch profits in each country. Follow the instructions below instead.

2.1 Column A

Enter ‘LYD’ as the country code for the foreign country where the income arose.

2.2 Column C

Enter the total amount, in sterling, of foreign tax paid on your Lloyd’s income (from box 48 or 1L.78). Use the exchange rate prevailing at the date you received the income to translate the foreign tax to sterling.

2.3 Column F

Enter the total profits from membership of Lloyd’s (from box 52 or 1L.91). If you’re calculating your tax credit relief on your income, include the total foreign tax in box 3 on the Foreign pages. Then follow the instructions on Helpsheet 263 Calculating Foreign Tax Credit Relief on income, bearing in mind that for tax credit relief purposes your total profit from Lloyd’s (in box 52 or 1L.91) is regarded as one item of income. Foreign tax paid on Lloyd’s income (in box 48 or 1L.78) is regarded as foreign tax on that item of income.

3. Foreign tax repayments

You may have received refunds of foreign tax in 2022 to 2023 for example, from the carry back in the US of losses against profits of earlier years (‘Net Operating Losses’ or NOLs) which are shown on your CTA 1 (2018). For Names with no 2018 account participations, details will be reflected on the CTA 2 (2021). The treatment of these foreign tax refunds depends on how relief was originally given for the foreign tax now being refunded.

4. Foreign Tax Credit Relief

For refunds of foreign tax where relief was given against UK tax on earlier years’ Lloyd’s profits, the refund is treated as additional tax chargeable on Lloyd’s profits of the tax year corresponding to the calendar year that the refund was received in. Enter any amounts received in 2022 in box 28 or 1L.79. The exchange rate to use is the same rate that was used to calculate the amount of tax credit relief given for the foreign tax in the earlier year, which may differ from the sterling amount actually received in the later year. Where the refunds are of US tax, the amount is shown in sterling at the correct exchange rate on the CTA 1 (2018). Make sure that you include any figure in box 28 or 1L.79 also in box 14 on the tax calculation summary pages. If you’re working out your tax bill for 2022 to 2023, include the amount in box 28 or 1L.79 in box A275 on the working sheet in the tax calculation summary notes pages. The amount in box A275 also goes to box 14 on the tax calculation summary pages.

5. Relief by deduction

Where relief for foreign tax was originally given by deduction from Lloyd’s profits or losses, any refunds of the tax relieved are added to the Lloyd’s income of the year that the refund was received in. Enter any such refunds received in 2022 to 2023 in box 24 or 1L.58E. No entry is needed in box 28 or 1L.79.

6. Personal stop loss

6.1 Stop loss insurance

Stop loss is a type of insurance which provides cover if you make a loss of more than a specified amount in an underwriting year. If you make a loss on your syndicate results, a stop loss policy will pay over to you a certain portion of that loss, called a recovery. Premiums paid for these policies are allowed as deductions by reference to the calendar year in which they’re paid, regardless of the account or accounts covered by the policy for which the premium is paid.

6.2 Stop loss recoveries

Unlike other non-syndicate income, personal stop loss recoveries are, in general, included in box 22 or 1L.58D as Lloyd’s taxable income of the tax year in which the loss that triggered the recovery arises for tax purposes. For instance, a stop loss recovery in respect of a 2019 account loss is taxable in 2022 to 2023 even though you may not receive it until calendar year 2022. The exception to the general rule is where a recovery becomes payable for the loss of an earlier year and it was not possible to tell HM Revenue and Customs (HMRC) about it in time to include it for the year of loss. In these circumstances, the recovery is taxable in the tax year corresponding to the calendar year in which it was received.

6.3 Stop loss repayments

If, following the recovery, you’re compensated in some other way for the loss (for instance, by an award of damages), a stop loss policy requires you to pay back some or all of the recovery. Any repayments made directly to a stop loss insurer are treated in the same way as premiums; a deduction is allowed for the year of payment and should be entered in box 31. There’s no adjustment made to the year in which the recovery that’s being repaid was taxed.

6.4 Failed stop loss insurers

Should a personal stop loss insurer be unable to meet claims under policies in full, any sum not recoverable is treated for tax purposes as a bad or doubtful debt. Once you can establish that the recovery is unlikely to be paid in full, you need to make an estimate of the amount that’s in doubt. For example, a personal stop loss underwriter goes into liquidation. The liquidator issues a statement on 10 April 2022 which shows that only 40% of claims are likely to be paid. The amount you can claim as a deduction will be 60% of the amount still to be paid out under your personal stop loss policy. The deduction is given for the year in which you can establish the debt will not be paid in full, in this case 2022 to 2023. In common with bad debt relief for traders in general, the adjustment is made in the year the debt is established as doubtful, and not by adjusting the taxable profit or loss for the year the amount recoverable was taxed.

If in a later year the amount you expect to recover from your personal stop loss insurer decreases, you can make a further claim to bad debt relief for the reduction in the amount you expect to receive. Similarly, if the amount increases, or you receive more than the amount you expected to receive, the increase or the difference between the amount claimed as a bad debt relief and the amount received should be shown as an addition to profits in that year. Recoveries should be entered at box 22 or 1L.58D, or use box 31 or 1L.71 in the event of additional claims. Supply details in the ‘Any other information’ box, box 66 or 1L.92.

7. Capital Gains Tax

Gains arising on disposal of assets held as part of your personal funds at Lloyd’s should be included on the Capital Gains summary pages of the 2022 to 2023 tax return. Follow the general guidance notes that go with those pages and the more detailed guidance below.

8. Syndicate capacity

Gains arising on disposals of syndicate capacity should also be included on the Capital Gains summary pages. Syndicate capacity can be sold by auction, under a bilateral arrangement, or by capacity offer. Where you’ve sold syndicate capacity in the 2022 capacity auctions, or entered into other arrangements to sell capacity in the year ended 5 April 2023, the disposal proceeds are the amount received at auction or under the arrangement. Auction fees are allowable as incidental costs of disposal. Your members’ agent will supply you with details of the sale proceeds and incidental costs. Note that capacity in each syndicate is a separate asset for Capital Gains Tax purposes except where capacity is held via a Members’ Agent Pooling Arrangement (MAPA) (see below).

Where you’ve been underwriting with the same capacity since before the 1996 account, the cost of your capacity will be nil, because until capacity auctions were introduced in 1995, there was no charge for capacity. The entrance or admission fee which is payable on joining Lloyd’s is not allowed as a deduction from trading profits. But it can be deducted from gains on disposal of syndicate capacity, as an incidental cost of disposal in the year the Name resigns membership of Lloyd’s.

Where syndicates merge and you exchange this year’s capacity in one syndicate for capacity for the following year in a syndicate with a different number, provided no cash changes hands, this is not regarded as a chargeable occasion for Capital Gains Tax purposes. When you sell capacity in the new merged syndicate, the cost of acquisition is the cost to you of capacity in your original, pre-merger syndicate.

From 6th April 1999, all syndicate capacity held by an individual member through a MAPA is treated as if it were a single asset. Any capacity held through one MAPA is treated separately from capacity held through another MAPA, or capacity held directly.

If you receive a cash distribution from your MAPA operator, that’s a disposal or part disposal of the capacity held through the MAPA and should be reported on the Capital Gains summary pages. If you transfer syndicate capacity into or out of a MAPA that’s also a Capital Gains Tax disposal, and should be reported on the Capital Gains summary pages.

Where you’ve transferred capacity to a corporate member of Lloyd’s as part of a scheme to convert to limited liability underwriting, the transfer is a disposal for Capital Gains Tax purposes. In most cases, this will be a transfer between connected parties and you will need to use the market value of the capacity at the date of transfer. If you converted to limited liability underwriting through a Nameco, Scottish Limited Partnership or Limited Liability Partnership, you may be able to defer charges to Capital Gains Tax. See below for more details. Where the transfer is to a Scottish Limited Partnership or Limited Liability Partnership, the transfer is not generally regarded as a chargeable occasion — see Statement of Practice D12.

9. Reliefs

Roll-over relief allows gains on the disposal of qualifying business assets to be deferred if replacement assets are acquired. Gains made on the disposal of syndicate capacity, whether held directly or through a MAPA, will be eligible for roll-over relief. Syndicate capacity also qualifies as a replacement asset.

If you want to claim this relief, refer to Helpsheet 290 Business asset roll over relief.

10. Business Asset Disposal Relief

Business Asset Disposal Relief (known as Entrepreneurs’ Relief before 6 April 2022) reduces the rate of tax charged on a disposal of qualifying business assets. For 2022 to 2023 the Capital Gains rate is 10% or 20% depending on the total amount of your taxable income and gains. Gains qualifying for Business Asset Disposal Relief are taxable at 10%.

As long as you’ve met the qualifying conditions throughout a 2-year qualifying period either up to the date of disposal or the date the business ceased, relief (which, for disposals on or after 11 March 2020, is subject to a lifetime limit of £1million of qualifying capital gains for each individual) may be due. However, merely reducing the amount of syndicate capacity available to a Name does not constitute the disposal of part of the underwriting business, so relief will not be due on that.

11. Conversion to limited liability underwriting

Rules introduced in Finance Act 2004 permit converting Names to carry forward unused trading losses and to defer charges to Capital Gains Tax, subject to certain conditions. If you converted to a Nameco, Scottish Limited Partnership or Limited Liability Partnership, this legislation may apply to you. For more guidance, see the Lloyd’s Manual.

12. Losses

Note that the rules for claiming relief for losses arising from membership of Lloyd’s are in some ways different from loss relief for trades in general. The section of the information given in Helpsheet 227 relating to losses on claiming relief for trading losses to reduce your taxable profits in earlier years or following cessation, does not apply to losses from membership of Lloyd’s. The rules which apply to losses arising from membership of Lloyd’s are set out below, although the amount of relief available may be restricted following recent changes to the rules for loss relief.

13. Restrictions on the amount of loss relief

The changes to legislation restricting the amount of trading losses which may be set against other income with effect from 6 April 2013 apply to Lloyd’s underwriters as with any other trade. Refer to Helpsheet 227 for general guidance on claiming losses and the restrictions on the amount of loss which may be claimed with effect from 6 April 2013.

14. Time limits

Make your claims within the time limits shown below for losses in early years of trade and for terminal loss relief, and as shown in Helpsheet 227 for other loss relief claims. HMRC cannot usually accept late claims.

15. Cessation

The usual rule is that the final year of assessment for profits from membership of Lloyd’s is the tax year corresponding to the calendar year in which the deposit is repaid. However, for both deceased and surviving Names, there may be circumstances in which the last open syndicate year of account closes, or membership of Lloyd’s continues, after the deposit is released. In such cases the final year of assessment and the year of cessation of the underwriting trade may be different for tax purposes.

See the following sections for more information on cessation. If you’re in doubt as to the final year of assessment, or the final year of trading, write to Lloyd’s Underwriters Unit at the address shown below.

16. Loss reliefs on cessation (terminal loss relief)

Terminal loss relief is an alternative to the ordinary ways in which losses can be relieved but you must make sure that you do not claim the same loss twice. If you’ve already claimed some part of the terminal loss, then you must reduce the terminal loss by the amount of relief that you’ve already claimed.

For ceasing members of Lloyd’s, the loss available for terminal loss relief is the loss of the final tax year for which there were syndicate results included in the computation. If your final syndicate results were declared in 2022 (2019 account and/or run-offs to 31 December 2021), the loss of 2022 to 2023 is used for terminal loss relief purposes.

Your terminal loss must be set against any profits (after deducting losses brought forward) from membership of Lloyd’s taxed in the previous tax year — in the above example, 2022 to 2023. Once these have been reduced to nil, any balance of the terminal loss must be set against profits taxed in the preceding year, 2020 to 2021. Finally, if there’s still a balance, this must be set against the Lloyd’s profits taxed in 2019 to 2020.

Because of the special way in which this relief works for Names, in some circumstances the terminal loss may not be the loss of the final year of assessment. For example, where the final syndicate results are declared in 2022 but the deposit is released in January 2023 — the loss for terminal loss relief purposes is that of 2022 to 2023 but the final year of assessment will be 2023 to 2024.

You do not need to wait until you’re ready to send your completed tax return to claim terminal loss relief. You can claim relief as soon as you know the amount of the loss, usually once you’ve had the tax adjusted results for 2022 to 2023 sent to you by Lloyd’s Tax Operations at Chatham on CTA 1 (2018) and the CTA 2 (2021). You may write a letter saying that you wish to claim terminal loss relief showing the date of cessation of trade and details of the amount of the loss.

17. Relief for members who have been underwriting since before 1972

For Names who have been underwriting members of Lloyd’s for the 1971 account or earlier and have underwritten continuously since then, special relief at cessation of underwriting is available to compensate for any double counting of profits that may have arisen from the change in basis of assessing profits from membership of Lloyd’s brought in for 1972 to 1973 and subsequent years. If you’re in this position, write to Lloyd’s Underwriters Unit at the address shown below who have maintained records of the amount of relief that may be available under this provision.

18. Special Reserve Funds (SRF)

These funds can be set up by individual (unlimited liability) Names under Section 175 Finance Act 1993. Personal representatives of deceased members may not set up SRF. If you have SRF, you may transfer up to half the aggregate of your commercial (not your tax adjusted) syndicate profits for any account into your fund. If the aggregate syndicate result is a loss, you must withdraw sufficient from the fund to meet the loss.

When the value of assets in the fund exceeds 50% of the higher of:

• your overall premium limit
• your overall premium limit for the previous year

Any balance is returned to you as taxable income — transfers to and withdrawals from the fund also happen when there are cash calls, stop loss recoveries and on cessation.

If you have such a fund, you will need to complete the entries in the Lloyd’s underwriters pages for transfers into and withdrawals from the fund. Lloyd’s Tax Operations at Chatham report the net transfer to your fund for each tax year on the relevant Taxation Advice. Net withdrawals or releases from a Special Reserve Fund should be shown in box 21 or 1L.58C, and net transfers to such a fund in box 30 or 1L.68A.

19. Time limits

Transfers from account 2019 profits to a Special Reserve Fund must be made on or before the date on which any profits were paid over to you and transfers must in all cases have been completed by 31 October 2022.

20. Releases from Special Reserve Fund on cessation

For Names who have ceased, the balance of the fund is taxed as trading income of the final year that Lloyd’s results are assessable on the name personally. For surviving Names, this will be the final year of assessment of the trade, but may be different for deceased Names — full details are given in the notes on Trust and Estate income from membership of Lloyd’s. Lloyd’s Tax Operations at Chatham will issue a certificate valuing the release to be assessed. If details are not available, enter in box 21 or 1L.58C an estimate based on the value of remaining funds and make a note of the adjustments in the ‘Any other information’ box, box 66 or 1L.92.

21. Death

The tax return to be filled in by personal representatives of deceased Names depends on the date the name died.

Where death occurs after 5 April 2022 but before 31 December 2022 the personal representatives should enter the Lloyd’s result on the 2022 to 2023 Trust and Estate income from membership of Lloyd’s pages.

Where death occurs between 1 January 2023 and 5 April 2023 enter the Lloyd’s result on the Lloyd’s underwriters pages for that year.

Full details of the rules for cessation, final year of assessment and so on, are explained in the notes on Trust and Estate income from membership of Lloyd’s. If you need help in determining the final year, write to Lloyd’s Underwriters Unit at the address shown below.

22. Coronavirus support payments

Amounts of any taxable coronavirus support payments that you were entitled to and received should be included in box 25 or 1L.58 as ‘other Lloyd’s non-syndicate income’. This includes payments from the Self-Employed Income Support Scheme (SEISS) and other taxable grants and payments that you were entitled to and received from local authorities or devolved administrations.

If you received an amount of a SEISS grant that you were not entitled to and it has not been voluntarily paid back to HMRC or you have not received an assessment issued by an officer of HMRC in respect of the incorrectly claimed payment, provide details of the incorrectly claimed amount on page TR 5 of the main tax return SA100 or in box 21.6B of the SA900 Trust and Estate Tax Return.

23. Exempt amounts

This applies only to Names who are not ordinarily resident and not domiciled in the UK. For these Names, gains and losses on certain types of gilts (FOTRAs) held in syndicate premium trust funds are not within the charge to UK tax. The gains or losses are shown on the CTA 1 (2018) as ‘income exempt to non-UK resident/non-UK domicile’. Positive amounts are allowed as deductions and should be entered in box 39 or 1L.71 as ‘other expenses’. Negative amounts should be added to profits for the year by including them in box 25 or 1L.58. Also include details of the adjustments in the ‘Any other information’ box, box 66 or 1L.92.

24. More information

Go to the Lloyd’s Manual or write to:

HM Revenue and Customs Lloyd’s Underwriters Unit S1278 BX9 1BN

25. Contact

For more information about Lloyd’s Underwriters, phone 03000 527405.

For more information about online forms, phone numbers and addresses contact Self Assessment: general enquiries.