Tax advisers to ‘names’ at Lloyd’s of London are helping the insurance market to fight a legal test case against the Inland Revenue’s treatment of reinsurance-to-claim (RITC) funds.
When Lloyd’s syndicates close their accounts, they set aside a contingency fund to pay outstanding claims that may arise in the future. But in guidance sent to syndicates and their tax advisers last month, the Revenue confirmed its contention that RITCs should be discounted for tax purposes.
A Revenue spokesman confirmed that 1994 accounts for Lloyd’s syndicates had not been agreed and that RITC amounts and discounts were the subject of ‘private discussions’.
Peter Ridge, senior partner at Neville Russell’s London office and head of the firm’s insurance practice, said the amounts being contested were ‘very substantial’.
Lloyd’s would be at a competitive disadvantage if it accepted discounting, said Ridge, who explained: ‘The Revenue is effectively taxing future income the syndicates haven’t got.’
Neville Russell is involved in advising Lloyd’s on the RITC issue, but was not involved in any test cases, said Ridge.
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