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HMRC internal manual

Lloyd's Manual

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

There are two reliefs under regulation 13.

The first gives a deduction from the underwriting profits of a Name’s penultimate year equal to the lesser of the taxable profits of the 1972 account and the underwriting profits of the penultimate year.

The second allows the underwriting profits of the last year to be reduced on a time apportioned basis to the profits earned in the last year (in practice 9/12ths, as Names cease on 31 December).

Losses and Double Taxation Relief

The underwriting profits for both reliefs are the figures before deduction of any losses brought forward under ICTA88/S385 and ITA07/S83. If relief for Lloyd’s foreign tax has been claimed for either year as a deduction from profits (rather than as credit relief), the penultimate year deduction is made (regulation 13(2)(b)) and the apportionment made (regulation 13(2)(a)) after deduction of the foreign tax.

Relief is given against syndicate profits only

Both reliefs are only given against sums derived directly from syndicate membership, and therefore only apply to syndicate results. Relief is not given in either case against ancillary trust fund income, nor against special reserve fund releases.

Results from run-off syndicates are included in the figures to be apportioned, but only the results which are declared in what would have been the normal closing year for the syndicates concerned. For example, if a Name underwrites for the last time on the 2002 syndicates, then relief under regulation 13(2)(a) will be due on the results from 2002 syndicates closing at 31 December 2004, and declaring a result in 2005, and the results from 2002 syndicates remaining open, but declaring a result in 2005.

It will not be due on profits or losses declared in 2005 by, for example, a 1999 run-off syndicate.

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1972 profits

The relief for account 1972 profits can reduce the penultimate year’s profit to nil, but it cannot create or augment a loss. If the account 1972 profit is greater than the penultimate year profit, any excess relief is lost. High Net Worth Unit (Shipley) has details of Names who underwrote on the 1972 account.

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Years for which relief is given

The last year is the final year in which a Name’s Lloyd’s trading income assessment included the results of syndicates which closed at the normal time.

For example, a Name commenced underwriting 1 January 1965. The name resigned with effect from the end of the 2001 account. Some syndicates remained in run off, eventually closing and declaring their final result in April 2006. The Name’s deposit was released in January 2007.

The Name’s last year for the purposes of regulation 13 relief was 2004-05, the year the results of the last accounts to close at the normal time were assessable (account 2001 closed 31 December 2003, results declared June 2004). The trading profits of this year were reduced to 9/12ths.

The penultimate year was 2003-04, and the profits of this year were reduced by the amount of the 1972 account profits.

The Name’s final tax year was 2007-2008, the tax year corresponding with the calendar year in which the deposit was released. For terminal loss relief purposes, it is the loss of 2006-07 which is taken as the loss of the final 12 months, since the results of the last open account to close were declared in April 2006, the calendar year corresponding with 2006-07.