For corporate members of Lloyd’s, DTR before the advent of
the pooling rules (see
LLM7150) is given subject to the rules
which apply to other companies – see INTM160000 onwards (
LLM10000). The special pooling rules
which apply for individual members do not apply to corporate
members. All the other usual conditions for DTR apply to corporate
members as they do to other taxpayers. For example, ICTA88/S795A
provides that DTR can only be given if the taxpayer has taken all
reasonable steps to take advantage of all reliefs and exemptions
against the foreign tax liability. There is no obligation to carry
back losses in priority to a carry forward.
In keeping with the underlying principles of the DTR legislation, the credit which may be given for foreign tax paid on income arising in another country should not exceed the UK tax charge on the same income.
The main difficulties in applying the normal DTR rules for companies are to be found in their application to US tax. Tax is payable in the US on the basis of returns made by each member to the IRS. The US tax code does not recognise the three-year system of accounting. Tax is paid on an annual basis and is not deferred until the declaration of syndicate profits as it is in the UK. For example in the UK tax paid on the basis of the 2002 return will relate to the profits of the 1999 year of account. In the US it will relate to:
A further difficulty is that some expenses, including profit
commission, are allowed in the UK as deductions against the profits
of the year of account to which they relate. In the US they are
allowed in the year in which they are paid.
A practical approach to dealing with US tax of corporate members is set out at LLM7190.