The Regulations set out rules for the tax years to which the different types of foreign tax are allocated.
Some premiums from insurance policies paid through foreign
brokers or agents are received by managing agents net of foreign
tax. The foreign tax may be an insurance premium tax of the foreign
country (which would not be available for DTR) or a profits tax
which uses turnover as a simple way of measuring profits. Syndicate
results are reported net of foreign tax and any foreign tax which
is available for DTR is reported separately to Names. The types of
foreign tax that qualify for DTR are agreed between Lloyd’s
and HMRC, based on the agreement between Lloyd’s and each
foreign tax authority as to how tax on profits from Lloyd’s
business originating in that country will be computed and
collected.
To the extent that the foreign tax is available for DTR, the
general rule is to allocate it to the Lloyd’s foreign tax
pool for the tax year that the premiums are included in trading
profits (regulation 4 SI1997/405). Particular timing rules apply to
US and Canadian tax (
LLM7050). In recent years, DTR has become
a more important issue for Lloyd’s business in territories,
such as Japan and Singapore, which use an annual accounting system
for insurance similar to the US. In such cases the US rule may be
applied, avoiding the need for disaggregation and
apportionment.
Foreign tax deducted from ATF income is allocated to the tax
year that corresponds with the calendar year in which the income is
received by the Name (regulation 5 SI1997/405). This means that the
foreign tax on ATF income is included in the Lloyd’s foreign
tax pool for the same year as the income is included in the trading
profits.
For instance, on 28 February 2003, a Name receives interest
net of French withholding tax. The interest arose from a cash
deposit with a French bank which forms part of his ATF. The French
withholding tax is included in the Lloyd’s foreign tax pool
for 2003-04, and the French interest is included in the
Lloyd’s trading profits for 2003-04.
