Names: income from ancillary trust funds (‘ATFs’): taxed income
Certain items of ATF income are generally paid to the Name under deduction of tax (such as bank interest), with tax credits attached (for example dividends) or ‘notional’ tax (for example scrip dividends). The net amount received by the Name plus the amount of tax deducted, tax credit or notional tax is included in the taxable trade income. Credit is then given for tax deducted from interest and for tax credits attached to dividends against income tax due for the tax year the interest or dividends fall to be included in Lloyd’s trade profits (which may not be the same tax year in which the dividend or interest is paid). From 6 April 1999, tax credits arising from dividends, including notional tax on scrip dividends, are ‘ring-fenced’ and can only be set against Lloyd’s trade income.
If the amount of tax due from the Name for the year is less than the tax deducted from interest any excess may be repaid in the normal way. Tax credits attached to dividends are not repayable after 6 April 1999.
Repayment may not be claimed until the Lloyd’s trade profit or loss for the year has been computed (in practice, any time after the end of the relevant tax year).
The ‘corresponding year’ basis also applies to tax deducted at source - see LLM5290.
ATF income is not income from ‘savings and distributions’
Interest and dividends that are included in Lloyd’s trade income are not regarded as income from savings and distributions for the purposes of ICTA88/S1A. The tax withheld from Lloyd’s ATF income is therefore offset against total tax due rather than meeting tax on the specific income.
For example, a Name’s 2003-04 Lloyd’s Case I profits of £11,000 include £1000 interest (from which £200 tax has been deducted). The Name’s other income for the year is farming profits of £8,000. The Name’s self assessment for the year will be:
|Net taxable income||14385|
|Tax due||1960 @ 10%||196.00|
|12425 @ 22%||2733.50|
|Less tax at source||(200.00)|
|Net tax due 2003-04||2729.50|
|Class 4 NIC||14385 @ 8%||1 150.80|
The £200 tax at source is offset against the total income tax due rather than meeting the Name’s liability to lower or basic rate tax on £1,000 income.