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HMRC internal manual

Lloyd's Manual

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HM Revenue & Customs
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Names: terminal loss relief: final year quota share

Cessation of underwriting can take place as the result of entering into a quota share contract (LLM5180). As for other cessations, the final year for terminal loss relief (TLR) purposes is determined by the final year in which profits or losses arising directly from membership of syndicates, or from premium trust find (PTF) assets, fall to be assessed on the member.

For example, a Name takes out a quota share contract in June 2005, to come into effect straight away. Syndicate results declared in 2005 are the last which will be assessed on the Name, so his final year for TLR will be 2005-06.

Where a Name enters a quota share contract, all the results of syndicate accounts taken over by the reinsurer under the contract are treated as profits for TLR purposes (regulation 14(6) SI1995/351). Any losses covered by the contract are therefore not available to create or augment a final year’s loss.

If there is any doubt about which year’s profits or losses are taken over by the reinsurer under the quota share contract, it may be necessary to examine a copy of the contract before deciding which is the final year for TLR purposes.