LLM8270 - Inheritance tax: Names: valuation of the Lloyd’s interest

Following the death of a member, the three elements of the Lloyd’s interest must be valued and agreed with Shares and Assets Valuation. The open market value at the date of death is used for assets held in ancillary trust funds.

The open years’ results are valued on the basis of the Lloyd’s audit results at the end of the calendar year immediately prior to death (unless the executors, within one year of the grant of probate, elect for the valuation to be on the actual results when known). For example, a Name dies in September 2007. The 2005 and 2006 accounts are still open, and these are valued at 31 December 2006.

The basis of valuation stems from IHTA84/S160 in tandem with IHTA84/S216 (3)(a).

Method of valuation of open years

The valuation of the open years of account is based on the annual Lloyd’s Solvency Statement for the year preceding the year in which the member dies. Adjustments are then needed to take into account various personal expenses which are not included in the Solvency Statement.

These expenses will include payments such as the annual contribution to Lloyd’s central fund, winding-up fees, and other expenses met by the managing agent on behalf of the Name which are not included in the syndicate results reported for solvency purposes. In addition, there are expenses such as Estate Protection Plans (EPPs) and stop loss premiums which may be charged to the Name’s personal account by the members’ agent - these expenses are not included in the syndicate account, so neither are they incorporated in any of the syndicate results reported for solvency purposes.

Open years for valuation purposes

In practice Shares and Assets Valuation accept that for valuation purposes a syndicate is treated as being open if the results had not been declared at the date of death. Historically, an account was treated as remaining open if the reinsurance to close (RITC) had not been completed at the date of death. This led to practical difficulties in ascertaining the date the RITC contracts were signed, particularly for deaths during the early months of a year.

Estate protection plan and stop loss

Where Names had EPP or stop loss policies ( LLM5180) in place for open years, the cover available under the policies is a factor in arriving at the net value of the Lloyd’s interest of the deceased Name. The level of excess (if any) included in the terms of the policies is also taken into account.

The valuation of the Lloyd’s interest is subject to a number of discounts ( LLM8280).