Names leaving a MAPA usually take with them the syndicate
participations they held in the final account they participated in
via the MAPA. In this case there is no disposal for CG purposes.
Where the Name subsequently disposes of capacity that was
originally acquired through a MAPA, the cost of acquisition of
capacity in the particular syndicate that has been sold is based on
amounts subscribed to the MAPA operator and the relative value of
capacity in that particular syndicate compared with the overall
value of the syndicate capacities withdrawn from the MAPA at the
date the Name withdraws from the MAPA.
When a Name leaves a MAPA, the operator will convert his or her
share of capacity held via the MAPA to the same amount of capacity
in the same syndicates but to be held on a bespoke basis. The MAPA
operator will inform the Name of the indexed base cost of each
participation up to the date of conversion.
The indexed base cost for each syndicate capacity is arrived
at by the MAPA operator as follows.
First the MAPA Operator takes the weighted average value
(WAV) of the capacity in each syndicate in which the MAPA was
involved in that account. WAVs are the average of prices achieved
for capacity in a particular syndicate in that summer’s
auctions and are published a week or two after the summer auctions
have ended.
For instance if syndicate A capacity was traded £500,000
@ 10p/£ in auction 1, £1,000,000 @ 8p/£ in auction 2
and £1,500,000 @ 9p/£ in auction 3, the WAV would be
(0.5m x 10p + 1m x 8p + 1.5m x 9p)/3m = 8.83p/£.
A value is then ascribed to the Name’s entire MAPA
portfolio by summing the product of the WAV for each syndicate and
the Name’s share of that capacity. If a Name underwrote
£10,000 in syndicate A via the MAPA, the value contributed by
that participation is 10,000 x 8.83p = £883.
The cost of acquisition of each syndicate participation is
then worked out by apportioning the Name’s subscription to
the MAPA across the participations by reference to their
contributions to the value of the Name’s entire MAPA
portfolio. For instance if the Name in the example above had paid
£5,000 to join the MAPA the cost of acquisition of syndicate A
capacity is:
883/MAPA value x £5,000.
For indexation purposes, the date of acquisition is taken as
the date the Name was irrevocably committed to underwrite. For
instance if the subscription was paid in 1996, to participate via
the MAPA for the 1997 account, indexation would run from 30
September 1997 (see
LLM8240). Indexation is not due after
April 1998, and for disposals after that date, indexation is only
given up to April 1998, or not given at all if the asset was
acquired after that date.
