Where a Name has made their Funds at Lloyd’s (FAL)
interavailable (
LLM6020) to provide security for both
open year unlimited business and for future business through a
corporate vehicle, business property relief will continue to be
available during the period of interavailability, subject to the
usual conditions.
If a Name had made their FAL interavailable during the
conversion process from unlimited to limited underwriting, business
relief is available at 100% on the deposits during the period of
interavailability, subject to the usual conditions.
Business relief was initially extended to the FAL used to
support the underwriting activities of a Nameco alone but this
concession was withdrawn. A Lloyd’s Market Bulletin Y2840 to
this effect was issued on 23 July 2002.
Representations made by Lloyd's led to an agreement to limit
this restriction. A Lloyd’s Market Bulletin Y3161 was issued
on 14 October 2003. Subsequently HMRC agreed to review the position
in 2004-05. Following this review, a further Bulletin Y3822 issued
on 31 May 2006 included the following summary of the finally agreed
new arrangements.
Third party FAL (including assets backing a bank
guarantee)
For deaths on or before 31 December, business relief will
continue to be given on third party FAL assets, including amounts
guaranteed under bank guarantees. However, the relief will be
capped at the level of FAL needed for 2002 and will also be subject
to the overriding constraint that the funds eligible for relief
cannot be disproportionate to the level of underwriting as a whole.
Interavailable FAL
For deaths on or before 31 December, full business relief
will be given on interavailable FAL up to the level needed for
2003.
HMRC will deal with deaths after the end of 2006 as follows.
Third party FAL (including assets backing a bank
guarantee)
As set out in the Bulletin of 23 July 2002, no business
relief will be given, but the valuation of the assets for IHT
purposes must take into account the negative value of the FAL
arrangement to the estate.
Interavailable FAL
Business relief will be given on interavailable FAL assets,
including amounts guaranteed under bank guarantees, to the extent
that the interavailable FAL is not disproportionate to the
individual's unlimited liability underwriting.
To the extent that business relief is not given (for example,
if the FAL is technically interavailable but there is no exposure
to unlimited liability underwriting), the valuation of the assets
for IHT purposes must take into account the negative value of the
FAL arrangement to the estate.
A further Lloyd’s Market Bulletin Y3204 issued on 8
December 2003 provides examples of how the new arrangements will
work in practice.
