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HMRC internal manual

Lloyd's Manual

HM Revenue & Customs
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Names: other Lloyd’s-related income and expenditure: introduction

As well as income and expenses arising directly from membership of syndicates (LLM5050), and ancillary trust fund income (LLM5060), Names receive other items of Lloyd’s-related income, and pay other expenses connected with their underwriting. Such income and expenditure are included in the trade profit or loss assessable as trade income.

Although specific provisions in FA93 govern when and how certain items of Lloyd’s related income and expenditure are dealt with for tax purposes, the general rules that apply to the computation of profits from other trades apply to Lloyd’s profits. For instance, to be allowed as a deduction from Lloyd’s trading profits, an expense must be revenue in nature rather than capital, and must be incurred wholly and exclusively for the purposes of carrying on the trade of underwriting as a member of Lloyd’s.

Corresponding year basis

Non-syndicate income and expenditure (other than stop loss recoveries and special reserve fund transfers - see below) is dealt with on a form of cash basis. It is taxable in the corresponding underwriting year in which it is received or paid, regardless of the year of account to which the income or expenditure relates (LLM5290). For example, compensation received in March 2005 as a result of litigation (irrespective of the account to which the litigation related) is taxable 2005-06. A stop loss insurance premium for the 2006 account paid in December 2005 is a trading deduction of 2005-06 (FA93/S172 (1)(c) - see LLM5180). (FA93/S178 specifies when stop loss recoveries are taxable, but does not provide a timing rule for payment of premiums - this follows from FA93/S172 (1)(c).)

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Types of non-syndicate income and expenses

LLM5130 and LLM5140 consider the two most common examples of non-syndicate income - stop loss insurance recoveries and compensation.

LLM5150 and LLM5160 deal with the most common examples of non-syndicate expenditure.

LLM5170 deals with the treatment of central fund expenses.

LLM5180 onwards explains ‘Name level’ insurance contracts.

LLM5230 onwards deals with transfers to and withdrawals from the special reserve fund.