Finance Act 1994

Other special cases

224 Reinsurance to close

(1) Subject to subsection (2) below, section 177 of the 1993 Act (reinsurance to close) shall apply for the purposes of this Chapter as it applies for the purposes of Chapter III of Part II of that Act (Lloyd’s underwriters: individuals).

(2) That section as so applied shall have effect as if—

(a) the member by whom the premium is payable were required to be a corporate member;

(b) the member to whom the premium is payable might, but need not, be such a member; and

(c) any reference to the purposes of income tax were a reference to the purposes of corporation tax.

225 Stop-loss and quota share insurance

(1) In computing for the purposes of corporation tax the profits of a corporate member’s underwriting business, each of the following shall be deductible as an expense, namely—

(a) any premium payable by it under a stop-loss insurance, and any repayment of insurance money paid to it under such an insurance; and

(b) any amount payable by it under a quota share contract, irrespective of the purpose for which the contract was entered into.

(2) Subject to subsection (3) below, the following provisions apply where any insurance money is payable to a corporate member under a stop-loss insurance in respect of a loss in its underwriting business—

(a) if the underwriting year in which the loss is declared falls within two or more accounting periods, the apportioned part of the insurance money shall be treated as a trading receipt in computing the profits arising from the business for each of those periods; and

(b) if the underwriting year in which the loss is declared falls within a single accounting period, the insurance money shall be treated as a trading receipt in computing the profits arising from the business for that period.

(3) Where, as respects the payment of any such insurance money as is mentioned in subsection (2) above—

(a) the inspector is not notified of the payment at least 30 days before the time after which any assessment or further assessment of profits for any of the accounting periods or (as the case may be) the accounting period is precluded by section 34 of the Management Act (ordinary time limit), and

(b) the inspector is not entitled, after that time, to make any such assessment or further assessment by virtue of section 36 (fraudulent or negligent conduct) of that Act,

that subsection shall have effect in relation to the apportioned part of that insurance money or (as the case may be) that insurance money as if, instead of that accounting period, it referred to the accounting period in which the payment is made.

(4) In this section—

• “apportioned part”, in relation to any insurance money, means a part apportioned under section 72 of the Taxes Act 1988;

• “quota share contract” means any contract between a corporate member and another person which—

  (a)

  is made in accordance with the rules or practice of Lloyd's; and

  (b)

  provides for that other person to take over any rights and liabilities of the member under any of the syndicates of which it is a member.