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HMRC internal manual

Lloyd's Manual

Names: basis of assessment: post cessation receipts and expenses

The general rules which apply to income received and expenditure incurred after a trade has ceased (Chapter 18 of Part 2 ITTOIA 2005, explained in BIM80500 - see LLM10000) apply to income and expenditure arising after the final tax year of the Lloyd’s trading profits.

Interest paid after cessation

Payments of interest made after the Name’s final year are allowed only as expenses for offset against post cessation receipts.

Returned premiums under the arrangement between Equitas and Berkshire Hathaway

Ceased Names who paid into Equitas as part of the Reconstruction and Renewal arrangements, and may have entered into Hardship Agreements (LLM5030) may receive a return premium taxable in 2007-08 as a post cessation receipt. But if cessation took place in 2001-02 onwards, the former Name may elect under ITTOIA05/S257, by 31 January 2010, to have the receipt taxed in the final year of trading.

Lloyd’s underwriting trading losses carried forward at cessation may be set off against the post cessation receipt in 2007-08. In many cases cessation will be years in the past, raising evidential issues. It is a question of fact whether trading losses are available. The fact that a Hardship Agreement was entered into by the Name establishes that Lloyd’s trading ceased in circumstances where substantial losses are likely to have been made and are likely to remain available. Local offices who wish to do so may verify the existence of the Hardship Agreement with Lloyd’s but only where permission has been given by the former Name. With this in mind, affected Names have been advised by Lloyd’s to supply the necessary authorisation when submitting the relevant tax return.