Finance (No.2) Act 1987

70 Lloyd’s underwriters.

(1) This section applies where, in accordance with the rules or practice of Lloyd’s and in consideration of the payment of a premium, one underwriter agrees with another to meet liabilities arising from the latter’s business for an underwriting year so that the accounts of the business for that year may be closed.

(2) In computing for the purposes of income tax the profits or gains of his business, the amount of the premium shall be deductible as an expense of the underwriter by whom it is payable only to the extent that it is shown not to exceed a fair and reasonable assessment of the value of the liabilities in respect of which it is payable.

(3) Any part of a premium which, by virtue of subsection (2) above, is not deductible as an expense of the underwriter by whom it is payable shall be disregarded in computing for the purposes of income tax the profits or gains of the business of the underwriter to whom it is payable.

(4) The assessment referred to in subsection (2) above shall be taken to be fair and reasonable only if it is arrived at with a view to producing the result that a profit does not accrue to the underwriter to whom the premium is payable but he does not suffer a loss.

(5) In this section “underwriter” means an underwriting member of Lloyd's, and expressions used in Schedule 10 to the Taxes Act have the same meanings as in that Schedule.

(6) This section has effect in relation to premiums payable in connection with the closing of the accounts of an underwriter’s business for an underwriting year ending in the year of assessment 1985-86 or any later year of assessment.