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. U.K.

F1 (2) In computing for the purposes of income tax the profits of the member’s underwriting business for [F2 the relevant year of assessment], any payment under paragraph 7(1) above [F3 (except where they are also made under paragraph 6(2) above)]which is made to him or his personal representatives or assigns out of his special reserve fund shall be treated—

(a) [F4 subject to sub-paragraph (2A) below,] as made immediately after the end of [F2 the relevant underwriting year]; and

(b) as being a [F5 single] trading receipt of an amount equal to that mentioned in sub-paragraph (3) below.

[F6 (2A) Where the member ceases to carry on his underwriting business by reason of his death, any payment falling within sub-paragraph (2) above shall be treated, for the purposes of sections 59C and 86 of the Management Act F7 , as if made immediately after the commencement of his final year of assessment.]

(3) The amount referred to in sub-paragraph (2) above is the value of the fund, as determined under paragraph 6(1) above for [F8 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 [F9 3(1),]4(2) or (3) or 5(4) above so made; F10 . . .

(c) as increased by the amount of any tax repayment F11 . . . under paragraph 9(2) F11 . . . above after the end of that year.

[F12 (d) as increased by an amount equal to any profits, and reduced by an amount equal to any losses, arising to the trustees from assets after the end of that year (excluding any gains or losses on assets whose transfer is treated as an acquisition by sub-paragraph (4)(a) or (b) below); and

(e) as increased by the aggregate amount of any payments made—

(i) by the trustees to the member or his personal representatives or assigns,

(ii) out of his special reserve fund under paragraph 7(1) above (except where they are also made under paragraph 6(2) above), or otherwise than out of his special reserve fund, and

(iii) before the end of that year,

and for this purpose the amount of any payment which is made by way of the transfer of an asset shall be taken to be the market value of the asset at the date of the transfer and “market value” shall be construed in accordance with section 272 of the Taxation of Chargeable Gains Act 1992 F13 .]

(4) Where an asset is transferred to the member or his personal representatives or assigns under paragraph 7(1) above [F14 or otherwise than out of his special reserve fund], the transfer shall be treated, for the purposes of the Gains Tax Acts [F15 —

(a)

in a case where the asset was held by the trustees at the end of the penultimate underwriting year, as an acquisition of the asset by the member or his personal representatives or assigns at the end of that year for a consideration equal to its market value at that time;

(b)

in a case where the asset was acquired by the trustees after the end of the penultimate underwriting year, as an acquisition of the asset by the member or his personal representatives or assigns, at the date on which, and for the consideration for which, the asset was acquired by the trustees; and

(c)

in a case where the asset was both acquired by the trustees and transferred by them to the member or his personal representatives or assigns before the end of the penultimate underwriting year, as an acquisition of the asset by the member or his personal representatives or assigns at the date of the transfer and for a consideration equal to its market value at that time.]

[F16 (5) In this paragraph, subject to the provisions of any regulations made by the Board—

“the penultimate underwriting year” means the underwriting year [F17 corresponding to the year of assessment immediately preceding the member’s final year of assessment;]

[F18 “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)

  [F19 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 F20 , as having died;]

  (b)

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

[F21 (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 By S.I. 1999/3308, reg. 6(2)(a), it is provided that for the words “any payment which is” there shall be substituted (31.12.1999 with effect for the year 2000-01 and subsequent years of assessment and in relation to payments and transfers of assets made on or after 1.1.2000) the words “the aggregate of any payments which are”

F2 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)

F3 Words in Sch. 20 para. 11(2) inserted (31.12.1999 with effect for the year 2000-01 and subsequent years of assessment and in relation to payments and transfers of assets made on or after 1.1.2000) by S.I. 1999/3308, reg. 6(2)(b)

F4 Words in Sch. 20 para. 11(2)(a) inserted (31.12.1999 with effect for the year 2000-01 and subsequent years of assessment and in relation to payments and transfers of assets made on or after 1.1.2000) by S.I. 1999/3308, reg. 6(2)(c)

F5 Word in Sch. 20 para. 11(2)(b) inserted (31.12.1999 with effect for the year 2000-01 and subsequent years of assessment and in relation to payments and transfers of assets made on or after 1.1.2000) by S.I. 1999/3308, reg. 6(2)(d)

F6 Sch. 20 para. 11(2A) inserted (31.12.1999 with effect for the year 2000-01 and subsequent years of assessment and in relation to payments and transfers of assets made on or after 1.1.2000) by S.I. 1999/3308, reg. 6(3)

F7 1970 c.9; section 59C was inserted by section 194 of the Finance Act 1994, and amended by section 109(1) of the Finance Act 1995. Section 86 was substituted by section 110(1) of the Finance Act 1995.

F8 Words in Sch. 20 para. 11(3) 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)

F9 Words in Sch. 20 para. 11(3)(b) inserted (31.12.1999 with effect for the year 2000-01 and subsequent years of assessment and in relation to payments and transfers of assets made on or after 1.1.2000) by S.I. 1999/3308, reg. 6(4)(a)

F10 Word in Sch. 20 para. 11(3) omitted (31.12.1999 with effect for the year 2000-01 and subsequent years of assessment and in relation to payments and transfers of assets made on or after 1.1.2000) by virtue of S.I. 1999/3308, reg. 6(4)(b)

F11 Words in Sch. 20 para. 11(3)(c) repealed (31.7.1997 with effect in relation to distributions made on or after 6.5.1999) by 1997 c. 58, ss. 34, 52, Sch. 4 Pt. II para. 30(1)(b)(2), Sch. 8 Pt. II(10) Note

F12 Sch. 20 para. 11(3)(d)(e) added (31.12.1999 with effect for the year 2000-01 and subsequent years of assessment and in relation to payments and transfers of assets made on or after 1.1.2000) by S.I. 1999/3308, reg. 6(4)(d)(e)

F13 1992 c.12; section 272 was amended by paragraph 12 of Schedule 38 to the Finance Act 1996 (c.8).

F14 Words in Sch. 20 para. 11(4) inserted (31.12.1999 with effect for the year 2000-01 and subsequent years of assessment and in relation to payments and transfers of assets made on or after 1.1.2000) by S.I. 1999/3308, reg. 6(5)(a)

F15 Words in Sch. 20 para. 11(4) substituted (31.12.1999 with effect for the year 2000-01 and subsequent years of assessment and in relation to payments and transfers of assets made on or after 1.1.2000) by S.I. 1999/3308, reg. 6(5)(b)

F16 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)

F17 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)

F18 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)

F19 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)

F20 Section 179A of the Finance Act 1993 was inserted by paragraph 6(2) of Schedule 21 to the Finance Act 1994.

F21 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)