Compensation arising from any legal action connected with or
arising from membership of Lloyd’s is taxable trading income
year of the tax year corresponding to the calendar year of receipt,
regardless of the underwriting account that gave rise to the
action.
Compensation covers amounts awarded as damages as a result of
court action, recoveries of legal costs arising from litigation in
connection with membership of Lloyd’s and any sums paid in
out of court settlements. The 1996 House of Lords’ decision
in the (non tax) case of Deeny and others v Gooda Walker Ltd (1996
STC 299) established that such compensation was a receipt arising
from the Name’s business as an underwriting member of
Lloyd’s, and was revenue rather than capital in
character.
