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HMRC internal manual

Lloyd's Manual

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HM Revenue & Customs
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Equalisation reserves for corporate and partnership members: application of the section 444BA ICTA rules

Broadly speaking, the rules that apply to give equalisation reserve relief to general insurance companies apply in the same way to Lloyd’s corporate and partnership members.

Classes of business affected

See GIM7030. However, Lloyd’s corporate and partnership members do not maintain equalisation reserves for credit insurance (the Society of Lloyd’s does) and consequently only the five non-credit categories listed are relevant.

Limits on transfers in and out

See GIM7040.

Calculation

See the following paragraphs of the General insurance Manual

  • GIM7060 (calculation)
  • GIM7070 (creation of the reserve, which applies without regard to the de minimis limit - see LLM3420)
  • GIM7080 and GIM7090 (ring fencing and maximum level of reserve)
  • GIM7100 and GIM7110 (summary and example).

Adaptations

The Regulations make specific adaptations to ICTA88/S444BA. Most of these are matters of terminology, for example substituting reference to corporate or partnership member for reference to insurance company. SI2009/2039 regulation 4(2) overcomes the difficulty that private (non-large corporate) Lloyd’s investors (in particular) may have difficulty supplying the records necessary to determine the five year average written premium figure referred to at GIM7040 and prescribed by the equalisation reserve rules at INSPRU 1.4.24. It provides that no regard will be had for this purpose to any period before 1 January 2005.

Many matters relating to the main relief rules do not apply in the context of Lloyd’s members, including

  • apportionment provisions for mutual business, overseas business and for non-resident companies (as discussed at GIM7360 and GIM7320)
  • non-annual accounting (as discussed at GIM7230 - the declaration basis applies, as normal for Lloyd’s members)
  • ‘other’ equalisation reserves (as discussed at GIM7280 to GIM7300 - including those required by overseas regulators).

The rules at LLM7000+ apply to govern double taxation relief, rather than GIM7330.