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HMRC internal manual

Lloyd's Manual

Names: other Lloyd’s-related expenditure: items allowable when paid: fees and subscriptions

LLM5150 to LLM5170 give examples of the most common type of expenses that are allowable as trading deductions for the tax year corresponding to the calendar year in which they are paid, regardless of the underwriting account to which the expense relates.

Accountancy fees

Fees paid for work done in calculating the taxable underwriting profit or loss are allowable. For example, £500 paid in January 2006 for work done in 2005 in relation to the 2002 account results is a deduction in arriving at the 2006-07 Lloyd’s profit or loss.

In common with other trades, fees for work such as inheritance tax planning, in relation to other business interests, or submission of loss claims, cannot be claimed as a trade deduction. Where the underwriter is an accountant and has dealt with his Lloyd’s tax affairs personally, he can only claim a deduction for accountancy fees if a charge has been made, and that charge is reflected in the professional fees of the firm to which he belongs.

Entrance, admission and resignation fees

The initial subscription to join Lloyd’s (the Entrance or Admission Fee) is a capital expense and not allowed as a trading deduction, although it is allowable as an incidental cost in calculating the capital gain on disposal of syndicate capacity when a Name finally resigns from Lloyd’s (LLM8020).

Fees payable to a members’ agent or to Lloyd’s when a Name resigns are allowable.

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Lloyd’s members association expenses

Subscriptions to certain associations of Lloyd’s members, such as the Association of Lloyd’s Members (ALM) are allowable. High Net Worth Unit (Shipley) can advise to what extent, if any, related expenses such as the cost of attending meetings of the association, or making contributions to costs of legal actions co-ordinated by the association, or similar expenses for other bodies are allowable.

Once the Name has ceased trading for tax purposes, these expenses are not allowable deductions. The argument that a Name has not ceased trading simply because they reinsured pre-1993 liabilities into Equitas, and might at some point be called on to make further payments in respect of those liabilities is not accepted for tax purposes, since the date of cessation is laid down by FA93/S179 (1).

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Members’ agents expenses

Profit commission and members’ agent salaries are charged to Names and paid at the distribution date following the close of an account. For instance, the 2003 account closed on 31 December 2005. The profits were distributed in mid 2006, and the members’ agent expenses for that account were deducted at the same time. They are allowable as a trading deduction for 2006-07.

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Solvency audit fees

Fees paid by Names each year for the audit to determine whether they pass the annual solvency test are allowable.

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Subscriptions to specialist Lloyd’s publications, such as Lloyd’s List and the ‘Blue Book’ are allowable.