Corporate members: syndicate capacity
The nature of syndicate capacity and how it may be acquired and disposed of is discussed at LLM1120 onwards.
For corporate members, the correct accounting treatment is that of a capital payment for an intangible fixed asset (see paragraphs 30 to 34 of ICAEW Technical Release TECH 1/99 and LLM4020). However, transactions in syndicate capacity by corporate members are brought within Case I of Schedule D by FA94/S219 (3)(b) and FA94/S230 (2)(a)(ii).
This means that the profit or loss brought into charge for tax purposes will be the difference between the sale proceeds and the cost of the capacity, with no indexation allowance as there would be were the asset subject to the chargeable gains regime. The cost of capacity will be nil if the corporate member held the capacity before the auction system was introduced for the 1996 YOA (see LLM1140).
The tax treatment for accounting periods before 1 April 2002 is discussed at LLM4180. The tax treatment for accounting periods ending after 1 April 2002 under the intangible fixed assets regime introduced by FA02/SCH29 is discussed at LLM4190.
Members’ Agents Pooling Arrangements (MAPAs)
Although corporate members may be (and some are) members of MAPAs (seeLLM1110), the rules at FA99/S82 do not apply to them. This means that, unlike individual members, corporate members cannot treat all capacity held via a MAPA as a separate single asset and they must ‘look through’ the MAPA to establish the various syndicate participations that they own.