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HMRC internal manual

Lloyd's Manual

HM Revenue & Customs
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Corporate members: taxation of syndicate profits: the declaration basis: the tax computation

The profit or loss figure from the technical account will not feature in the taxable profits, as the technical account includes profits or losses which are not yet taxable. The profits or losses which were declared in the year covered by the accounts will however feature in the taxable profits. An adjustment is therefore needed to remove the profits from the technical account, and add the profits declared in the year. Taking the example in LLM4030 and LLM4040, the adjustment is as follows.

Profit per accounts: 4,464
Less: underwriting income in accounts (4,135)
Plus: 2003 underwriting profit declared 2006 6,234
Taxable Profits: 6,563

Taxable profits are subject to any other adjustments required in arriving at the figure of Case I profits.

Provisions for open years

The ICAEW Technical Release, TECH 1/99 (LLM4020) recommends that a corporate member should make provisions in respect of losses arising from open underwriting years if a loss is foreseen. If these provisions are made, they will feature in the technical account, and the example of a technical account shown at LLM4030 includes a provision of this type.

These provisions are not allowable for tax purposes, as they are not profits or losses declared in the appropriate year (FA94/S220 (2)(a)). This specific legislation overrules the accounts treatment. It follows that if a company has a provision in its technical account, an adjustment should be shown in the tax computations removing it.