LLM5150 - Names: other Lloyd’s-related expenditure: items allowable when paid: fees and subscriptions
LLM5150 to LLM5170 give examples of the most common type of
expenses that are allowable as trading deductions for the tax year
corresponding to the calendar year in which they are paid,
regardless of the underwriting account to which the expense
relates.
Accountancy fees
Fees paid for work done in calculating the taxable underwriting
profit or loss are allowable. For example, £500 paid in
January 2006 for work done in 2005 in relation to the 2002 account
results is a deduction in arriving at the 2006-07 Lloyd’s
profit or loss.
In common with other trades, fees for work such as
inheritance tax planning, in relation to other business interests,
or submission of loss claims, cannot be claimed as a trade
deduction. Where the underwriter is an accountant and has dealt
with his Lloyd’s tax affairs personally, he can only claim a
deduction for accountancy fees if a charge has been made, and that
charge is reflected in the professional fees of the firm to which
he belongs.
Entrance, admission and resignation fees
The initial subscription to join Lloyd’s (the Entrance or
Admission Fee) is a capital expense and not allowed as a trading
deduction, although it is allowable as an incidental cost in
calculating the capital gain on disposal of syndicate capacity when
a Name finally resigns from Lloyd’s (
LLM8020).
Fees payable to a members’ agent or to Lloyd’s
when a Name resigns are allowable.
Lloyd’s members association expenses
Subscriptions to certain associations of Lloyd’s members,
such as the Association of Lloyd’s Members (ALM) are
allowable. West Yorkshire Personal Tax Unit (WYPTU) can advise to
what extent, if any, related expenses such as the cost of attending
meetings of the association, or making contributions to costs of
legal actions co-ordinated by the association, or similar expenses
for other bodies are allowable.
Once the Name has ceased trading for tax purposes, these
expenses are not allowable deductions. The argument that a Name has
not ceased trading simply because they reinsured pre-1993
liabilities into Equitas, and might at some point be called on to
make further payments in respect of those liabilities is not
accepted for tax purposes, since the date of cessation is laid down
by FA93/S179 (1).
Members’ agents expenses
Profit commission and members’ agent salaries are charged to Names and paid at the distribution date following the close of an account. For instance, the 2003 account closed on 31 December 2005. The profits were distributed in mid 2006, and the members’ agent expenses for that account were deducted at the same time. They are allowable as a trading deduction for 2006-07.
Solvency audit fees
Fees paid by Names each year for the audit to determine whether they pass the annual solvency test are allowable.
Subscriptions
Subscriptions to specialist Lloyd’s publications, such as Lloyd’s List and the ‘Blue Book’ are allowable.
