Finance Act 1993

Tax consequences of cessation U.K.

11 (1) This paragraph applies where a member ceases to carry on his underwriting business, whether by reason of death or otherwise.

(2) In computing for the purposes of income tax the profits of the member’s underwriting business for [F1 the relevant year of assessment], any payment under paragraph 7(1) above which is made to him or his personal representatives or assigns out of his special reserve fund shall be treated—

(a) as made immediately after the end of [F1 the relevant underwriting year]; and

(b) as being a trading receipt of an amount equal to that mentioned in sub-paragraph (3) below.

(3) The amount referred to in sub-paragraph (2) above is the value of the fund, as determined under paragraph 6(1) above for [F2 the penultimate underwriting year] and—

(a) as reduced by the aggregate amount of any payments under paragraph 4(1) or (6) or 5(1) or (7) above made after the end of that year;

(b) as increased by the aggregate amount of any payments under paragraph 4(2) or (3) or 5(4) above so made; and

(c) as increased by the amount of any tax repayment or tax credit received under paragraph 9(2) or (3) above after the end of that year.

(4) Where an asset is transferred to the member or his personal representatives or assigns under paragraph 7(1) above, the transfer shall be treated, for the purposes of the Gains Tax Acts, to be an acquisition of the asset by the member or his personal representatives or assigns for a consideration equal to its market value as at the end of [F2 the penultimate underwriting year].

[F3 (5) In this paragraph, subject to the provisions of any regulations made by the Board—

“the penultimate underwriting year” means the underwriting year [F4 corresponding to the year of assessment immediately preceding the member’s final year of assessment;]

[F5 “the relevant underwriting year” means—

(a)

where a member dies before the occurrence of any of the events specified in sub–paragraph (6) below, the underwriting year immediately preceding that corresponding to the relevant year of assessment; and

(b)

in any other case, the underwriting year corresponding to the year of assessment immediately preceding the member’s final year of assessment.]

• “the relevant year of assessment” means—

  (a)

  [F6 where a member dies before the occurrence of any of the events specified in sub-paragraph (6) below, the year of assessment at the end of which he is treated, by virtue of section 179A(2) of this Act F7 , as having died;]

  (b)

  in any other case, his final year of assessment.]

[F8 (6) For the purposes of the definitions of “the relevant underwriting year” and “the relevant year of assessment” in sub–paragraph (5) above the events specified before the occurrence of which a member dies are the following—

(a) the member’s deposit at Lloyd’s is paid over to him or his assigns, or to a person other than the member or his assigns;

(b) the member or another person is released from any arrangement entered into by the member or that person in order to satisfy the requirement on the part of the member to provide a deposit at Lloyd’s;

(c) the last open year of account of any syndicate of which he was a member is closed.

(7) For the purposes of sub–paragraph (6)(c) above, the last open year of account of any syndicate of which a person was a member shall be regarded as having closed either—

(a) when the member is treated under the rules or practice of Lloyd’s as having been discharged of all his liabilities in relation to that syndicate, whether by the syndicate closing its accounts or by the member or his personal representatives or assigns entering into a quota share contract, or

(b) in a case where the member entered, or his personal representatives or assigns have entered, into a quota share contract before the end of the closing year of the syndicate, at the end of the underwriting year in which the contract was made.]

Textual Amendments

F1 Words in Sch. 20 para. 11(2) substituted (3.5.1994 with effect for the year 1994-95 and subsequent years of assessment) by 1994 c. 9, s. 228, Sch. 21 para. 15(1)

F2 Words in Sch. 20 para. 11(3)(4) substituted (3.5.1994 with effect for the year 1994-95 and subsequent years of assessment) by 1994 c. 9, s. 228, Sch. 21 para. 15(2)

F3 Sch. 20 para. 11(5) substituted (3.5.1994 with effect for the year 1994-95 and subsequent years of assessment) by 1994 c. 9, s. 228, Sch. 21 para. 15(3)

F4 Words in Sch. 20 para. 11(5) substituted (9.3.1995 with effect for the year 1994-95 and subsequent years of assessment) by S.I. 1995/353, reg. 8(2)(6)

F5 Definition in Sch. 20 para. 11(5) substituted (9.3.1995 with effect for the year 1994-95 and subsequent years of assessment) by S.I. 1995/353, reg. 8(3)(6)

F6 Words in Sch. 20 para. 11(5) substituted (9.3.1995 with effect for the year 1994-95 and subsequent years of assessment) by S.I. 1995/353, reg. 8(4)(6)

F7 Section 179A of the Finance Act 1993 was inserted by paragraph 6(2) of Schedule 21 to the Finance Act 1994.

F8 Sch. 20 para. 11(6)-(7) added (9.3.1995 with effect for the year 1994-95 and subsequent years of assessment) by S.I. 1995/353, reg. 8(5)(6)