 to work out adjustments under section 107 FA 2000
These notes provide a practical guide to using the "Lloyd's Allocation of claims and provisions calculator" on the "General Insurance Reserves (Tax) Regulations section of the Inland Revenue website. You can find more guidance on the application of section 107 FA 2000 and the General Insurance Reserves (Tax) Regulations in Chapter 6 of the General Insurance Manual and Chapter 3 of the Lloyd’s Manual in the “Manuals” section of this web site.
General comments
Calculation for 2000
Step 1  find the original provision for 2000
Calculation for 2001
Step 2  find the cost of settling 2000 liabilities in 2001
Step 3  find the original provision for 2001
Calculation for 2002
Step 4  find the cost of settling 2000 and 2001 liabilities in 2002
Step 5  find the original provision for 2002
Example
Let us assume that a member's participation on a syndicate increases from 20% for the 1997 underwriting year, to 25% for the 1998 underwriting year and to 40% for the 1999 underwriting year. The figures for the total amount of claims and RITC paid by the syndicate in each year are as follows
Underwriting year for which amounts paid 
Underwriting year in which claims/RITC paid 


1997 
1998 
1999 

Claims paid for 1997 
£90 
£70 
£20 
Claims paid for 1998 
N/A 
£110 
£40 
Claims paid for 1999 
N/A 
N/A 
£130 
RITC paid for 1997 
£120 
£100 
£60 
RITC paid for 1998 
N/A 
£140 
£80 
RITC paid for 1999 
N/A 
N/A 
£160 
For 2000: enter the member's 20% participation on the 1997 year of account, and enter the syndicate's RITC of £120. You will see that the original provision for 2000 is £24. The calculator will look like this:

The starting point for the section 107 calculations is as follows:
1997 YOA  Original provision  Claims paid  Closing provision 

1997  24 
For 2001: clear these figures and change the "calculation is for" box to 2001. In the columns under 2000 and 2001 respectively enter the member's 20% and 25% participations, the syndicate claims of £70 and £110, and the syndicate RITC of £100 and £140. You will see that the member's claims paid in 1998 in respect of 1997 are £14 and the member's provisions are £20. For section 107 purposes, you will need to compare the discounted sum of these two figures with the original £24 provision. You will also see that the member's original provision for 1998 paid in 1998 is £40. The calculator will look like this:

The section 107 calculations therefore become:
1997 YOA  Original provision  Claims paid  Closing provision 

1997  24  
1998  14  20 
1998 YOA  Original provision  Claims paid  Closing provision 

1998  40 
For 2002: clear these figures and change the "calculation is for" box to 2002. In the columns under 2002, 2001 and 2002 respectively enter the member's 20%, 25% and 40% participations. Also enter the syndicate claims figures of £20, £40 and £130 respectively. Also enter the syndicate RITC figures of £60, £80 and £160 respectively.
You will see that for 1997 the claims paid are £4 and the closing provision is £12. For 1998 the claims paid are £11 and the closing provision is £23. For 1999 the original provision is £85. The calculator will look like this:
Calculation is for 
2002 


Underwriting Year 
2000 
2001 
2002 
Participation 
20% 
25% 
40% 
Syndicate Claims 
20 
40 
130 
RITC 
60 
80 
160 
Member Claims 
4 
11 
61 
Member Provisions 
12 
23 
85 
Participation for 2003 
40% 
The figures to use in section 107 calculations therefore become:
1997 YOA  Original provision  Claims paid  Closing provision 

1997  24  
1998  14  20  
1999  4 (cum 18)  12 
1998 YOA  Original provision  Claims paid  Closing provision 

1998  40  
1999  11  23 
1999 YOA  Original provision  Claims paid  Closing provision 

1999  85 
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