Inheritance tax: Names: valuation of the Lloyd’s interest
Following the death of a member, the three elements of the Lloyds interest must bevalued and agreed with Shares and Assets Valuation. The open market value at the date ofdeath is used for assets held in ancillary trust funds.
The open years results are valued on the basis of the Lloyds audit results atthe end of the calendar year immediately prior to death (unless the executors, within oneyear of the grant of probate, elect for the valuation to be on the actual results whenknown). For example, a Name dies in September 2007. The 2005 and 2006 accounts are stillopen, and these are valued at 31 December 2006.
The basis of valuation stems from IHTA84/S160 in tandem with IHTA84/S216 (3)(a).
Method of valuation of open years
The valuation of the open years of account is based on the annual Lloyds SolvencyStatement for the year preceding the year in which the member dies. Adjustments are thenneeded to take into account various personal expenses which are not included in theSolvency Statement.
These expenses will include payments such as the annual contribution to Lloydscentral fund, winding-up fees, and other expenses met by the managing agent on behalf ofthe Name which are not included in the syndicate results reported for solvency purposes.In addition, there are expenses such as Estate Protection Plans (EPPs) and stop losspremiums which may be charged to the Names personal account by the membersagent - these expenses are not included in the syndicate account, so neither are theyincorporated in any of the syndicate results reported for solvency purposes.
Open years for valuation purposes
In practice Shares and Assets Valuation accept that for valuation purposes a syndicateis treated as being open if the results had not been declared at the date of death.Historically, an account was treated as remaining open if the reinsurance to close (RITC)had not been completed at the date of death. This led to practical difficulties inascertaining the date the RITC contracts were signed, particularly for deaths during theearly months of a year.
Estate protection plan and stop loss
Where Names had EPP or stop loss policies (LLM5180) in placefor open years, the cover available under the policies is a factor in arriving at the netvalue of the Lloyds interest of the deceased Name. The level of excess (if any)included in the terms of the policies is also taken into account.
The valuation of the Lloyds interest is subject to a number of discounts (LLM8280).