LLM8070 - Capital gains: Names: syndicate capacity: disposals: syndicate mergers

Where two or more syndicates merge and the Names who participated on the merging syndicates neither receive cash as a result of the merger nor pay cash to continue underwriting in the merged syndicate in the following underwriting account, this is not a chargeable disposal for capital gains tax purposes.

When a Name sells capacity in the new, merged syndicate, this is a chargeable disposal in the same way as other sales of capacity, and the cost of acquisition is the cost to the member of the capacity in the pre-merger syndicate. As with other disposals, bespoke capacity and capacity held via a MAPA in the same syndicate are regarded as separate assets ( LLM8150).

For instance, Name A had participated at the same level on syndicate X since the 1990 account. In 2000, syndicates X and Y merged, and continued underwriting as syndicate Y in the 2001 account. No cash changed hands. When Name A sells all his syndicate Y capacity in the 2007 auctions, the cost of acquisition will be the cost of his syndicate X capacity, in this case, nil, since it was acquired before capacity could be bought and sold.

If the Name receives cash as a result of a merger, this amounts to a part disposal of capacity in the pre-merger syndicate for capital gains tax purposes. If the Name pays cash to continue on the merged syndicate, this will be an additional cost of acquiring the capacity in the merged syndicate.