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HMRC internal manual

Lloyd's Manual

Syndicate accounts: taxation: transactions in foreign currencies: forex differences after closing date

Syndicate profits may be distributed partly or wholly in US dollars. The delay between the closing date of the accounts and the distribution of profits is likely to result in the value of US$ profits distributed to members being different from the value of profits shown in the accounts. The managing agent will reflect this adjustment in the syndicate return and hence in the Lloyd’s taxation advice CTA1 (see LLM1170). No further adjustment is needed.

For example, in the case of a US$ profit release made in May 2009 in respect of the 2006 year of account closing on 31 December 2008, the exchange rate at the year end was 1:1.4400, and at the May release date it was 1:1.5217:

Profit release May 2009 US$ 20,000
£ equivalent May 2009 @ 1.5217 £13,143.19
£ equivalent 31 December 2008 @ 1.4400 £13,888.89
Forex (loss) on US$ release (£745.70)

Corporate members are expected to follow the CTA1 figures rather than their own annual accounts to avoid double counting. They therefore need to ensure that any accounting entry made in the annual accounts reflecting the foreign exchange gain on early profit releases is eliminated from the tax result by adding it back or deducting it where appropriate.

This example assumes that the member chooses to receive the distribution in sterling. The same adjustment would apply if the member receives the distribution in dollars. In this case, Lloyd’s Market Services will show the date the dollars were released to them, enabling the member to make any further foreign exchange adjustments on the currency asset, where appropriate.