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HMRC internal manual

Lloyd's Manual

From
HM Revenue & Customs
Updated
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Names: income from ancillary trust funds (‘ATFs’): dividends and scrip dividends: 6 April 1999 onwards

With effect from 6 April 1999, tax credits on dividends cannot be repaid. The tax credits are also ring-fenced, and can only be set against Lloyd’s trade income. The ring-fencing arises from ITTOIA05/S397 (3).

Notional tax on scrip dividends that is included in Lloyd’s trade profits can only be offset against income tax due on those profits. If the tax due on Lloyd’s profits is less than the notional tax, any excess of notional tax cannot be offset against income tax due on other income for the year and neither is it repayable to the Name (ITTOIA05/S414 (2)). This also applied to notional tax on foreign income dividends, before their abolition in 1999.

If in the example in LLM5090, the Name’s trading profits included £1000 FID (including £200 notional tax) and the Name had Lloyd’s trading losses of £10,500 to bring forward from 2002-03, the 2003-04 Lloyd’s trading profits would be £500 and the computation would be:

  £ £
     
Lloyd’s profits 500  
Farming profits 8000  
Total profits 8500  
Less PA 4615  
Net taxable income 3885  
Tax due 1960 @ 10% 196.00
  1925 @ 22% 423.50
    619.50
Less notional tax restricted to 500 @ 22% (110.00)
Net tax due 2003-04   509.50
Class 4 NIC 3885 @ 8% 310.80