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HMRC internal manual

Lloyd's Manual

Names: syndicate results and premium trust fund (‘PTF’) income

Syndicate results include the pure underwriting profit or loss, and syndicate investment income and capital gains. The taxable amounts are those declared in the corresponding underwriting year: for example, results of the 2003 underwriting year, which are declared after 5 April 2006 are taxable in 2006-2007 (FA93/S172 (1)(a)). The taxable result of each syndicate underwriting year or run-off period is determined by the managing agent (LLM2180), apportioned to the members of the syndicate, and aggregated (by Lloyd’s Members Services) to produce that Name’s overall syndicate profit or loss for an account. This overall result then feeds in to the computation of the Name’s taxable profit or loss for a tax year.

‘Personal’ expenses

Managing agents will also incur some items of expense on behalf of the Names who participate in the syndicate, such as central fund levies. These expenses are reported to Names as syndicate expenses and are allowed as deductions for the tax year in which those results arise by virtue of FA93/S184 (2)(c). For instance, central fund contributions in respect of the 2003 account will appear in syndicate results for the 2003 account and be included in the Name’s 2006-07 Lloyd’s trading profits, even though the managing agent will have made the contributions in 2003. The expenses will appear in the account to which the expenditure relates. As these expenses are incurred by managing agents and reflected in the tax adjusted syndicate results reported to the Name, they cannot be allowed as a separate non-syndicate deduction.

Syndicate foreign tax

Lloyd’s centrally pays various amounts of tax to some foreign jurisdictions on behalf of syndicates, and recharges them by reference to the amount of business written relevant to the different countries. As syndicates report their results net of this foreign tax, any foreign tax which would be available for relief under Chapter 17 of ICTA 1988 is added back in the Name’s computation of trade profits. Special pooling rules apply for individual members for giving relief for foreign tax suffered on Lloyd’s income. This syndicate foreign tax is one element that is included in the pool. For details on the pooling arrangements, see LLM7030.

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UK tax withheld from syndicate investment income

Some syndicate investment income is received by the managing agent net of tax. The difference between the net receipt and gross income includes income tax deducted from interest, tax credits attached to dividends and notional tax on scrip dividends. The syndicate managing agent claims back from HMRC any income tax deducted from interest and the gross amount is included in the syndicate investment income. From 6 April 1999, syndicates cannot reclaim the 10% tax credit attached to dividends.

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Early profit releases and Continuous Solvency Transfers

Syndicates have in the past been permitted to make funds available to Names in advance of the normal distribution dates for the profits. For example, releases from the 1993 and 1994 were used against prior years’ losses, and to meet the costs of Reconstruction and Renewal (LLM5030). These releases are similar to drawings from the business made by sole traders and do not affect the amount or tax year of the profits. The same applies to the Continuous Solvency Transfers (LLM1190) that have been allowed from PTFs to personal reserves since 2003, and which since 2005 have been available for release direct to members.