The Lloyd’s Underwriters (Roll-over Relief on Disposal of Assets of Ancillary Trust Fund) (Tax) Regulations 2016
Published 26 May 2016
© Crown copyright 2016
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Who is likely to be affected
Individual members of Lloyd’s and individual partners in Lloyd’s partnerships that are converting to underwriting through a successor company.
General description of the measure
Following a change to the rules of Lloyd’s, this measure ensures that individual members and individual partners in Lloyd’s partnerships that convert to company underwriting will remain entitled to a similar Capital Gains Tax (CGT) relief which would have been available if the Lloyd’s rule change had not been made.
Policy objective
Individuals and individual partners can defer any capital gains that arise following the disposal of assets that support underwriting to a company successor. This mirrors the tax treatment afforded to individuals and individual partners that incorporate outside of the Lloyd’s context.
Changes to the rules of Lloyd’s alter the method for determining the amount of assets that are required to support underwriting, inadvertently resulting in a reduction in CGT relief that individuals and individual partners can claim. This measure allows individuals and individual partners to claim a broadly similar CGT relief to that which they could have claimed before the rule change.
Background to the measure
Schedule 20A of Finance Act 1993 includes a CGT relief for individual members of Lloyd’s and individual partners in Lloyd’s partnerships that convert to underwriting through a company successor.
To ensure that excessive relief cannot be claimed, relief is limited to those assets that are required to support the successor company’s underwriting (or the member’s or partnership’s underwriting, if less).
Changes to the rules of Lloyd’s have amended their method of measuring the amount of assets required to support underwriting. The new method results in less CGT relief being available than would have been the case had the changes not been made.
The tax department at Lloyd’s and the members’ agents (who represent all of the individual members and individual partners at Lloyd’s) were consulted and shown draft regulations on the proposed changes. The drafting of this instrument reflects the comments made to this informal consultation.
Detailed proposal
Operative date
This measure will have effect for disposals of assets of the ancillary trust fund on and after 16 June 2016.
Current law
Current law is included in Schedule 20A of the Finance Act 1993.
Proposed revisions
The Lloyd’s Underwriters (Roll-over Relief on Disposal of Assets of Ancillary Trust Fund) (Tax) Regulations 2016 changes Schedule 20A to the Finance Act 1993 by secondary legislation.
The regulations amend Schedule 20A to allow individual members underwriting at Lloyd’s and individual partners in Lloyd’s partnerships broadly the same CGT relief they would have been entitled to on conversion before relief was unintentionally restricted following a change in the rules of Lloyd’s.
Summary of impacts
Exchequer impact (£m)
| 2016 to 2017 | 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 2021 | 2021 to 2022 |
|---|---|---|---|---|---|
| Negligible | Negligible | Negligible | Negligible | Negligible | Negligible |
This measure is expected to have a negligible impact on the Exchequer.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
The measure will affect around 450 individual underwriters at Lloyd’s as well as individual partners in around 700 partnerships. The vast majority of these partnerships have only one or two individual partners. The impact on affected individuals to comply will be less than £15 per year.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure will affect individuals within the protected equality groups that tend to be represented amongst those with above average income. It will ensure consistency of treatment between equality groups within and without the Lloyd’s context.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses. Those businesses affected by the change will incur a negligible one-off cost to update their systems. There are not expected to be any additional on-going costs.
This measure is not expected to have any impact on civil society organisations.
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
It is not anticipated that implementing this change will incur any additional cost or savings for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The changes made by the regulations will be kept under review through regular communication with taxpayer groups affected by the measure.
Further advice
If you have any questions about this change, please contact Darryl Wall on Telephone: 03000 585977 (or email: darryl.wall@hmrc.gsi.gov.uk).
Declaration
David Gauke MP, Financial Secretary to the Treasury has read this tax information and impact note and is satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impacts of the measure.