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HMRC internal manual

Lloyd's Manual

HM Revenue & Customs
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Names: basis of assessment: death

The rules for determining the final tax year of the trade, the final year the member is assessed personally, and the taxation of post-death Lloyd’s profits and losses, are determined by the date the Name died and the date the deposit was repaid.

Death is not an occasion of charge where accrued income securities are held in ancillary trust funds of members of Lloyd’s, and similarly there is no deemed disposal at death for deep discount, deep gain and convertible securities (FA93/S176 (3)).

Final account for deceased Names

Where a Name dies part way through the first 12 months of a year of account, namely on or before 31 December, they are treated as not having underwritten any business for that account. The account that ended 31 December before death is then the final account for which the deceased Name took new business. This is relevant for determining for which years regulation 13 SI1995/351 relief is available (relief for Names underwriting continuously since the 1971 account - see LLM5410).

Death on or after 6 April 1994: section 179A FA 1993

Death does not mark the cessation of the underwriting business for tax purposes. The trade continues after death and the final tax year of the trade is the same as for surviving Names. Where there is a Lloyd’s Deposit, the final tax year is that corresponding to the calendar year in which the deposit is paid over to the personal representatives. The same rules set out in LLM5330 apply to determine the final year where the deposit is repaid to a third party, where arrangements are released or where the deposit has been drawn down before the final result of the last open syndicate is declared.

The personal representatives are regarded as being the same persons carrying on the same trade as was carried on by the Name before death (FA93/S179A (3)) so any losses sustained in the trade before the Name died that have not been utilised before death can be carried forward as a deduction from the Lloyd’s trading profits of the personal representatives.

Similarly, terminal loss relief can be carried back and set-off against profits of pre-death years following the terminal loss relief rules (LLM5390). And subject to the normal rules for relief under ICTA88/S380 (1)(b), losses sustained in the first year the personal representatives carry on the trade can be offset against other income of the Name in the preceding year.

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Final tax year for Name personally

Although the trade continues after death, the final assessment of trading profits made on the Name personally is for the tax year which ends in the calendar year in which the Name dies (FA93/S179A (2)). If a Name dies in July 2006, the Lloyd’s profits of 2005-06 are assessed on the Name personally. Lloyd’s profits of 2006-07 are assessed in full on the personal representatives, even though some of the profits may have arisen while the Name was alive.

The importance of identifying the final year for which the Name (rather than the personal representative) is assessed on Lloyd’s trading profits lies in the rules for when the balance of a ceasing Name’s special reserve fund (LLM5280) is taxable. Where cessation is a result of death, the balance is taxable in the final year the Name personally is assessable on profits from membership of Lloyd’s.