The Lloyd’s Underwriters (Conversion of Partnerships to Underwriting through Successor Companies) (Tax) Regulations 2014

EXPLANATORY NOTE

(This note is not part of the Regulations)

Schedule 20A of the Finance Act 1993 (“FA 1993”) makes provision for certain reliefs to be available to individual members of Lloyd’s who convert to limited liability underwriting. As a consequence of changes to the rules of Lloyd’s which have made it more likely that Lloyd’s members that are limited liability partnerships or limited partnerships formed under the law of Scotland will want to convert to underwriting through successor companies, the Commissioners for Her Majesty’s Revenue and Customs consider it expedient to make amendments to FA 1993. These Regulations amend FA 1993 to include provision under Schedule 20A for relief from capital gains tax to be available in specified circumstances to individuals who are members (in the case of limited liability partnerships) or partners (in the case of Scottish limited partnerships) of partnerships that convert to underwriting through successor companies.

As a result of the amendments, providing the stipulated conditions are satisfied relief from capital gains tax is made available to individuals in two situations.

First, where a partnership converts and an individual receives shares in the successor company in return for the individual’s interest in the partnership’s syndicate capacity, the net chargeable gains accruing to the individual on the disposal will be rolled-over into the shares and the charge on the rolled-over gain will be deferred until the individual disposes of the shares.

Second, where a partnership converts and, either at the time of, or after, the conversion, there is a disposal to the successor company of assets forming some or all of the converting partnership’s ancillary trust fund, or of assets forming some or all of an individual member’s or partner’s ancillary trust fund associated with the partnership, in return for the issue to the individual of shares in the successor company, then, subject to certain limitations relating to the amount of security required in respect of the successor company’s underwriting business in its first underwriting year, the net chargeable gains accruing to the individual on the disposal of the assets will be rolled-over into the shares and the charge on the rolled-over gain will be deferred until the individual disposes of the shares.

A Tax Information and Impact Note covering this instrument will be published on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm.