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HMRC internal manual

Lloyd's Manual

Double taxation relief: individual Names: allocation of foreign tax

The Regulations set out rules for the tax years to which the different types of foreign tax are allocated.

Syndicate foreign taxSome premiums from insurance policies paid through foreign brokers or agents are received by managing agents net of foreign tax. The foreign tax may be an insurance premium tax of the foreign country (which would not be available for DTR) or a profits tax which uses turnover as a simple way of measuring profits. Syndicate results are reported net of foreign tax and any foreign tax which is available for DTR is reported separately to Names. The types of foreign tax that qualify for DTR are agreed between Lloyd’s and HMRC, based on the agreement between Lloyd’s and each foreign tax authority as to how tax on profits from Lloyd’s business originating in that country will be computed and collected.

To the extent that the foreign tax is available for DTR, the general rule is to allocate it to the Lloyd’s foreign tax pool for the tax year that the premiums are included in trading profits (regulation 4 SI1997/405). Particular timing rules apply to US and Canadian tax (LLM7050). In recent years, DTR has become a more important issue for Lloyd’s business in territories, such as Japan and Singapore, which use an annual accounting system for insurance similar to the US. In such cases the US rule may be applied, avoiding the need for disaggregation and apportionment.

Ancillary trust fund (ATF) incomeForeign tax deducted from ATF income is allocated to the tax year that corresponds with the calendar year in which the income is received by the Name (regulation 5 SI1997/405). This means that the foreign tax on ATF income is included in the Lloyd’s foreign tax pool for the same year as the income is included in the trading profits.

For instance, on 28 February 2003, a Name receives interest net of French withholding tax. The interest arose from a cash deposit with a French bank which forms part of his ATF. The French withholding tax is included in the Lloyd’s foreign tax pool for 2003-04, and the French interest is included in the Lloyd’s trading profits for 2003-04.