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HMRC internal manual

Lloyd's Manual

From
HM Revenue & Customs
Updated
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Names: non-resident members

The Centre for Non-Residents is responsible for dealing with the tax affairs of all non-resident individual Names. The trade of acting as an underwriting member of Lloyd’s is carried on wholly in the UK (in the Lloyd’s Building). This trade is carried on through a branch or agency, or permanent establishment. As such, non-resident Names are chargeable to income tax as trade profits on the full amount of profits from that trade, even though much of the underwriting business may be overseas insurance.

Income from Funds at Lloyd’s

Income from Funds at Lloyd’s wherever the assets in the funds are situated is explicitly included as part of the trade profits (FA93/S184 (2)(b)), whether paid under deduction of UK tax or not.

Gains on disposals of ancillary trust fund (ATF) assets

Since the assets in a Name’s ATFs are used for the purposes of a trade carried on in the UK through a branch or agency (underwriting as a member of Lloyd’s), Names are liable to CGT on the disposal of ATF assets which are situated in the UK.

Deemed disposals of ATF assets at cessation of trading

When non-resident Names cease to underwrite, normally when the Lloyd’s Deposit is released, they are deemed to dispose of their ATF assets and immediately reacquire them at market value (TCGA92/S25 (3)). Any consequential gains will be chargeable to CGT.

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ATF assets: accrued income securities

Although the computational rules of the Accrued Income Scheme are used to work out the amount of income or expense that arises when a Name purchases or sells such securities, the resulting amount is included in trading results for resident and non-resident Names alike. The only exceptions for non-residents are for foreign securities and FOTRAs.

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FOTRAs

There is no exemption from tax on the interest arising on FOTRA (free of tax to residents abroad) gilts that are held as part of a non-resident Name’s Funds at Lloyd’s. The income arising on gilts is included in trading profits.

Changes in value, and gains, of FOTRAs held in premium trust funds are disregarded for UK tax purposes for certain non-resident Names, by virtue of FA93\S154 (2). These amounts are known as ‘Exempt’ (or sometimes ‘Exempt B’) income. The disregarded amount can be positive or negative and is deducted from or added to the trade profits of Names who are not ordinarily resident (NOR) and non-UK domiciled.

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‘Own country tax’

When DTR is given by credit relief (LLM7020), it is not possible for any overseas residents, whether in the EEA or elsewhere, to be given relief for tax paid in the State where the overseas resident lives. For example, US Names cannot be given credit relief for US tax. Lloyd’s supply an analysis of overseas tax with the forms CTA1, and this analysis can be used to verify that credit relief has not been claimed for ‘own country’ tax.

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Non UK taxation advices

Lloyd’s Members Services provides special taxation advices for Names in USA, Canada, Ireland and Australia, to assist them in calculating liability in their own tax jurisdiction.