As well as income and expenses arising directly from
membership of syndicates (
LLM5050), and ancillary trust fund income
(
LLM5060), Names receive other items of
Lloyd’s-related income, and pay other expenses connected with
their underwriting. Such income and expenditure are included in the
trade profit or loss assessable as trade income.
Although specific provisions in FA93 govern when and how
certain items of Lloyd’s related income and expenditure are
dealt with for tax purposes, the general rules that apply to the
computation of profits from other trades apply to Lloyd’s
profits. For instance, to be allowed as a deduction from
Lloyd’s trading profits, an expense must be revenue in nature
rather than capital, and must be incurred wholly and exclusively
for the purposes of carrying on the trade of underwriting as a
member of Lloyd’s.
Non-syndicate income and expenditure (other than stop loss recoveries and special reserve fund transfers – see below) is dealt with on a form of cash basis. It is taxable in the corresponding underwriting year in which it is received or paid, regardless of the year of account to which the income or expenditure relates ( LLM5290). For example, compensation received in March 2005 as a result of litigation (irrespective of the account to which the litigation related) is taxable 2005-06. A stop loss insurance premium for the 2006 account paid in December 2005 is a trading deduction of 2005-06 (FA93/S172 (1)(c) – see LLM5180). (FA93/S178 specifies when stop loss recoveries are taxable, but does not provide a timing rule for payment of premiums - this follows from FA93/S172 (1)(c).)
LLM5130 and
LLM5140 consider the two most common
examples of non-syndicate income – stop loss insurance
recoveries and compensation.
LLM5150 and
LLM5160 deal with the most common
examples of non-syndicate expenditure.
LLM5170 deals with the treatment of
central fund expenses.
LLM5180 onwards explains ‘Name
level’ insurance contracts.
LLM5230 onwards deals with transfers to
and withdrawals from the special reserve fund.
