LLM7050 - Double taxation relief: individual Names: allocation of foreign tax: US and Canadian tax
US federal tax
The payment of US tax is administered centrally by Lloyd’s
Members Support Unit (MSU). The tax available for relief and the UK
tax year to which it is allocated are reported to Names on the
syndicate taxation advice CTA1 for the appropriate year.
US tax due to be paid in one calendar year is allocated to
the UK tax year corresponding to the calendar year next but two
after the calendar year in which it was due. Regulations then
permit double tax relief on that basis (regulation 6 SI1997/405).
For instance, US tax paid in 2003 is included in the foreign tax
pool of 2005-06, and will appear on the Name’s CTA1 (2005).
The rationale for this is that US tax paid in 2003 will be in
respect of Lloyd’s US profits of calendar year 2003. The
profits in the USA from membership of Lloyd’s are measured as
though syndicates are ongoing businesses, and not discrete annual
ventures. This means that the profits attributable to any
particular US tax year reflect elements of profits that arise in
three or more different years of assessment for UK purposes. US
2003 profits will include some of the profits from the 2001, 2002
and 2003 accounts. Rather than attempt to disaggregate the US tax
and apportion it to the UK tax years where the profits arise, the
tax is attributed to the account which contributes the largest
element of the US measure of profits, namely the middle year. In
this example it is the 2002 account the profits of which for UK tax
purposes arise in 2005-06.
Canadian federal tax
The payment of Canadian tax is also administered centrally by
Lloyd’s MSU. The tax available for relief and the UK tax year
to which it is allocated are reported to Names on the syndicate
taxation advice CTA1 for the appropriate year.
The measure of Lloyd’s profits which arises in Canada
is based, like ours, on the profit of the year of account, so the
difficulties that result from the US measure of Lloyd’s US
profits do not arise with Canadian foreign tax.
Details of allocation of Canadian tax are given by regulation
7 SI1997/405.
