10 DECEMBER 1999 CLEARER TAXATION FOR LLOYD'S UNDERWRITERS
The tax treatment of special reserve funds which can be held by individual members of Lloyd's has been improved by new regulations laid by the Inland Revenue today.
The tax treatment of special reserve funds which can be held by individual members of Lloyd’s has been improved by new regulations laid by the Inland Revenue today.
These regulations will have the effects of making taxation clearer while helping to prevent tax avoidance, and strengthening the security of the Lloyd’s market.
After an individual Lloyd’s member ceases underwriting and leaves the Lloyd’s market, funds held in a special reserve fund are released, giving rise to a tax charge. These regulations adjust and clarify certain details of that charge.
They also reduce the interest charged on the personal representatives of deceased members to bring the charge in line with that made on other members, and permit a variation in the annual valuation procedure for these funds.
The regulations are:
`The Lloyd’s Underwriters (Special Reserve Funds) Regulations 1999 (SI no.3308)’
Copies of the Regulations will be available from Her Majesty’s Stationery Office.
DETAILS
The Lloyd’s Underwriters (Special Reserve Funds) Regulations 1999 (SI no. 3308) amend Schedule 20 of FA1993, and will apply from 31st December 1999. They ensure that when funds are released from a Lloyd’s member’s special reserve fund after trading has ceased the calculation of the tax charge is clear and unambiguous.
They do this by:
– bringing into charge all sums released from the special reserve fund, including profits which have accumulated within the fund up to the date of disposal.
– altering in certain circumstances the dates when assets transferred to the member will be treated as acquired for capital gains tax purposes.
Additionally, the regulations reduce the interest charge that may arise on tax due from the personal representatives of deceased Lloyd’s members, bringing it into line with the interest charge that arises when other members resign.
Finally, the regulations allow for a variation in Lloyd’s procedures for annual valuation of special reserve funds, so that a comparison is made with the overall premiums limit of the higher of the valuation year and the preceding year.
The regulations governing these procedures are as set out in paragraph 6 of Schedule 20 FA 1993.
NOTES FOR EDITORS
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1. Lloyd’s underwriters who trade as individuals are allowed to put some of their profits in special reserve funds, which are then used to meet any underwriting losses in later years.
2. The regulations which govern the operation of the special reserve funds for Lloyd’s members are in Schedule 20 of Finance Act 1993.
3. The new regulations, the Lloyd’s Underwriters (Special Reserve Funds) Regulations 1999, modify Paragraphs 6 to 8 and 11 of Schedule 20.
http://www.inlandrevenue.gov.uk