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HMRC internal manual

Lloyd's Manual

HM Revenue & Customs
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Syndicate accounts: taxation: the reinsurance to close (RITC) premium

Tax adjustments to the RITC or EFL

Before FA2000, FA93/S177 and FA94/S224 determined the extent to which the RITC premium or the EFL was deductible in computing profits for tax purposes (LLM3210). The ‘fair and reasonable’ approach required by those provisions did not in practice work entirely satisfactorily. FA00/S107 introduced legislation governing the tax implications of sums added to RITC (LLM2060) or EFL (Estimate of Future Liabilities for run-off syndicates - LLM2070). This legislation, which operated at member level and applied also to general insurance companies, was again found to suffer from drawbacks, and was repealed by FA07/SCH11. There is more about the history of these provisions at GIM6150, GIM6190 and GIM6510.

See LLM3000+ for the detailed application of FA00/S107 and its successor FA07/SCH11. FA07/SCH11 and the related regulations SI2009/1926 potentially restrict RITC and EFL to an ‘appropriate amount’, which in the opinion of a ‘skilled person’, normally an actuary, is ‘not excessive’.