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HMRC internal manual

Lloyd's Manual

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HM Revenue & Customs
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Names: basis of assessment: non-syndicate income and expenses

Income from Funds at Lloyd’s

Income received in the calendar year (rather than the tax year) is included in the trade profits of the corresponding tax year. For instance, dividends from shares in a Name’s personal reserve fund are received in January 2004. This income is included in the 2004-05 trading profits.

Income, such as interest, credited to a member’s personal reserve fund at Lloyd’s on any date up to and including 31 December is taxable as part of the profits of that year, even if for practical purposes the member cannot actually have access to those funds until the following calendar year. This is because the ancillary trust funds are treated as bare trusts, by virtue of FA93/S176.

Taxed income

Income from Funds at Lloyd’s may be received net of tax, either interest paid under deduction of tax, or distributions with tax credits attached to them. For the purposes of offsetting tax under self assessment and computing payments on account, the tax withheld is treated as having been paid in the corresponding tax year (SI1995/351 regulations 7A, 7B and 7C). For instance, a Name receives net interest of £80 in February 2004, tax deducted £20. The Name had a trading receipt of £100 for 2004-05, and the £20 tax deducted is available to off-set against income tax due for 2004-05 (even though the interest was paid in 2003-04), and feeds into the computation of the 2004-05 ‘relevant amount’ to work out the payments on account for that year.

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Non-syndicate income and expenses

Other than for ATF income, a cash basis applies to determine the tax year for non-syndicate income and expenditure received or paid, with the exception of

  • stop loss recoveries (LLM5130)
  • personal expenses met on a Name’s behalf by the syndicate managing agent (LLM5050)
  • SRF transfers, withdrawals and releases (LLM5230 onwards).

Expenses paid in a calendar year are trading deductions of the corresponding tax year, so an accountancy bill for agreeing the 2005-06 profits paid in February 2007 (that is, in calendar year 2007) is a deduction in the tax computation for 2007-2008, even though the bill is paid in tax year 2006-07 and relates to the profits of 2005-06.