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HMRC internal manual

Lloyd's Manual

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Names: members underwriting since 1971: ‘regulation 13 relief’

Background

Major reforms to the taxation of profits from membership of Lloyd’s were enacted in FA73. Up to 1971-72, Lloyd’s profits had been assessed on a previous year basis. FA73 provided for Lloyd’s profits to be taxed on a current year basis, and introduced the corresponding year concept. As part of the change, Names received two separate assessments for 1972-73, one on the profits of the 1971 account and another on the profits of the 1972 account.

This double assessment combined with the commencement provisions which had applied previously meant that over the life-time of their involvement with Lloyd’s, a Name received more assessments of underwriting profits than the number of accounts in which they had participated. For example, a Name commenced underwriting 1 January 1970 and ceased 31 January 1973. Assessments would be

Example

Year Basis Profits Legislation
       
1969-70 First year 3/12 account 1970 ICTA88/S61 (1)
1970-71 Second year Account 1970 ICTA88/S61 (2)
1971-72 Third year Account 1970 ICTA88/S60 (3)
1972-73 1st assessment Account 1971 SI1974/896
1972-73 2nd assessment Account 1972 SI1974/896
1973-74 Current year Account 1973 ICTA88/S450

The name has been assessed on the profits of 5¼ underwriting accounts, despite having only participated in four.

To counter this, a Name who has been underwriting continuously since the 1971 account stops is allowed relief on cessation (similar in concept to overlap relief under self assessment) to take account of the double counting that arose when the taxation of Lloyd’s profits moved from a previous year basis of assessment to a current year basis. In the above example, the Name is allowed relief for profits arising on 1¼ accounts, the ‘1’ account being the profits of the 1972 account and the ‘¼’ being ¼ of the profits of the final account.

For 1992-93 and later, it is set out in regulation 13 SI1995/351. For earlier years, it was in regulation 21 SI1974/896.

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Lloyd’s Market Bulletin

A Lloyd’s Market Bulletin Y2482 on regulation 13 relief was issued on 12 February 2001.