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HMRC internal manual

Lloyd's Manual

Names: other Lloyd’s-related expenditure: Central Fund

Annual and special contributions to central fund are allowable as deductions from trading profits in the year in which they are paid.

Refunds of special contributions

Refunds of additional contributions to the Central Fund (as were made, for example, to help finance the R&R settlement offer - see LLM1020) are taxable as non-syndicate receipts for continuing Names and as post-cessation receipts for Names who have ceased their Lloyd’s trade.

Drawdowns and repayments

Where Names cannot or will not meet losses or cash calls made by syndicate managing agents, the Central Fund may step in and meet the loss or cash call on the Name’s behalf. This is referred to as a Central Fund drawdown. This drawdown replaces the debt owed by the Name (via the syndicate managing agent) to the policyholder with a civil debt owed by the Name to Lloyd’s Central Fund. This debt is legally enforceable.

Drawdowns are not taxable trading receipts and repayments of central fund indebtedness are not allowable as trading deductions. This reflects the true nature of drawdowns as giving rise to debts from Names to the Central Fund, and repayments being no more than Names meeting that indebtedness to the Central fund.