Syndicate accounts: taxation: syndicate returns and determinations (1)
The Lloyd’s Underwriters (Tax) Regulations 2005
Syndicate managing agents make returns of syndicate profits or losses to the Large Business Service (LBS) Financial Sector. The taxable profit or loss for each syndicate is ‘determined’ and the result is then shared out among the members who have participated on that syndicate.
A syndicate is not a taxpayer. Members of syndicates include their share of the syndicate profit or loss, as determined, in their own tax returns and pay tax accordingly. The syndicate determination is final and conclusive as against the members of the syndicate. The members do not have a right of appeal against it.
Returns up to and including those made in 2005 were made under the administrative machinery in FA93/SCH19. FA05/S45 contained legislation allowing for the repeal of this Schedule and its replacement by Regulations. These are the Lloyd’s Underwriters (Tax) Regulations 2005 (SI2005/3338).
The replacement Regulations update the administrative rules relating to syndicate returns and consolidate some rules from SI1992/351 which relate to managing agent responsibilities. They import a number of principles from the self assessment regime so that syndicate profits and losses are now ‘self-determined’ rather than being determined by the Inspector, as was the case under the Schedule 19 rules. They also permit, but do not require, electronic filing of syndicate returns by managing agents.
Following the end of an underwriting year, LBS (Financial Sector) issues notices, on forms LL250, to syndicate managing agents. These require them to make a return of syndicate profit or loss of the underwriting year that has just closed and any run-off underwriting years. The return constitutes a determination of the syndicate profit or loss.
The notice requires the return of accounts and tax computations. The accounts include the annual accounts the syndicate prepares for the period to the previous 31 December, the syndicate underwriting year accounts (LLM2200), and the accompanying managing agent’s and auditors’ reports.
For example, the notice issued in 2007 requires a return in respect of the 2004 underwriting year which closes or goes into run-off at 31 December 2006, and any earlier year which closes or was in run-off at that date. The return requires the annual accounts to 31 December 2006 and underwriting year accounts for 2004 and any earlier run-off year.
Filing date and enquiries
The return must normally be made by 1 July following issue of the notice. HMRC then has until the following 31 December to enquire into the return. After that date the determination is final, unless an enquiry is open.
The rules that apply to company enquiries under CTSA in FA98/SCH19 apply to any syndicate enquiry, with appropriate modifications. Where adjustments are agreed between HMRC and the managing agent, the managing agent must amend the determination accordingly.
The rules allow for HMRC determinations where the managing agent does not make a return, for ‘discovery’ determinations by HMRC where the original determination was incorrect, and error or mistake claims by the managing agent.
Where an enquiry into a syndicate return is opened, the tax returns of the members of the syndicate are deemed open for the duration of that enquiry, so that the necessary adjustments can be made to the profits or losses of each member as submitted on their own tax returns.