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Finance Bill
Schedule 25 — Lloyd’s names: conversion to limited liability underwriting

400

 

(a)   

the manufactured dividend is or was paid, or treated as paid, by the

person on or after 17th March 2004, or

(b)   

the chargeable gain accrues or accrued to the person on or after that

date.

Schedule 25

5

Section 134

 

Lloyd’s names: conversion to limited liability underwriting

1          

The Finance Act 1993 (c. 34) is amended as follows.

2          

After section 179A insert—

“179B   

  Conversion to limited liability underwriting

Schedule 20A to this Act (which makes provision for certain reliefs to

10

be available where a member converts to limited liability

underwriting) shall have effect.”.

3          

After Schedule 20 insert—

“Schedule 20A

Lloyd’s underwriters: conversion to limited liability underwriting

15

Part 1

Conversion to underwriting through successor companies

Introduction

1     (1)  

This Part of this Schedule applies if the following conditions are

satisfied.

20

      (2)  

Condition 1 is that—

(a)   

a member gives notice of his resignation from membership

of Lloyd’s in accordance with the rules or practice of

Lloyd’s,

(b)   

in accordance with such rules or practice, the member does

25

not undertake any new insurance business at Lloyd’s after

the end of the member’s last underwriting year, and

(c)   

the member does not withdraw that notice.

      (3)  

Condition 2 is that all of the member’s outstanding syndicate

capacity is disposed of by the member under a conversion

30

arrangement to a successor company (“the syndicate capacity

disposal”) with effect from the beginning of the underwriting year

next following the member’s last underwriting year.

      (4)  

Condition 3 is that, immediately before the syndicate capacity

disposal,—

35

(a)   

the member controls the successor company, and

(b)   

more than 50% of the ordinary share capital of the

successor company is beneficially owned by the member.

 

 

Finance Bill
Schedule 25 — Lloyd’s names: conversion to limited liability underwriting

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      (5)  

Condition 4 is that the syndicate capacity disposal is made in

consideration solely of the issue to the member of shares in the

successor company.

      (6)  

Condition 5 is that the successor company starts to carry on its

underwriting business in the underwriting year (“the successor

5

company’s first underwriting year”) next following the member’s

last underwriting year.

      (7)  

In this paragraph “the member’s last underwriting year”, in

relation to a member who gives notice of his resignation from

membership of Lloyd’s, means the underwriting year during

10

which, or at the end of which, he ceases to be an underwriting

member and becomes a non-underwriting member in accordance

with the rules or practice of Lloyd’s.

      (8)  

In this paragraph “outstanding syndicate capacity”, in relation to

a member, means the syndicate capacity of the member other than

15

any which—

(a)   

the member disposes of to a person other than a successor

member at or before the end of the member’s last

underwriting year, or

(b)   

ceases to exist with effect from the end of that year.

20

Income tax: carry forward of loss relief following conversion

2     (1)  

This paragraph applies if—

(a)   

the member’s total income for a year of assessment

includes any income derived by the member from the

successor company (whether by way of dividends on the

25

shares issued to the member or otherwise), and

(b)   

throughout the period beginning with the time of the

syndicate capacity disposal and ending with the end of

that year of assessment,—

(i)   

the member controls the successor company, and

30

(ii)   

more than 50% of the ordinary share capital of the

successor company is beneficially owned by the

member.

      (2)  

The carry-forward provision shall apply as if the income so

derived were profits on which the member was assessed under

35

Schedule D in respect of the member’s underwriting business for

that year.

      (3)  

But where under the carry-forward provision as applied by sub-

paragraph (2) above a loss falls to be deducted from or set off

against any income for any year of assessment, the deduction or

40

set-off shall be made in the first place against that part, if any, of

the income in respect of which the member has been, or is liable to

be, assessed to tax for that year.

      (4)  

In this paragraph “the carry-forward provision” means section 385

of the Taxes Act 1988 (carry-forward of trading losses against

45

subsequent profits).

Capital gains tax: roll-over relief on disposal of syndicate capacity

3     (1)  

This paragraph applies if—

 

 

Finance Bill
Schedule 25 — Lloyd’s names: conversion to limited liability underwriting

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(a)   

the aggregate of any chargeable gains accruing to the

member on the syndicate capacity disposal exceeds the

aggregate of any allowable losses accruing to him on that

disposal, and

(b)   

the member makes a claim under this paragraph to an

5

officer of the Board.

      (2)  

The amount of the excess mentioned in sub-paragraph (1)(a)

above (“the amount of the syndicate capacity gain”) shall for the

purposes of capital gains tax be reduced by the amount of the

rolled-over gain.

10

      (3)  

For the purpose of computing any chargeable gain accruing to the

member on a disposal by him of any issued share or any asset

directly or indirectly derived from any issued share—

(a)   

the amount of the rolled-over gain shall be apportioned

between the issued shares as a whole, and

15

(b)   

the sums allowable as a deduction under section 38(1)(a) of

the Gains Tax Act shall be reduced by the amount

apportioned to the issued share under paragraph (a)

above; but, in the case of a derived asset, the reduction

shall be by an appropriate proportion of that amount;

20

           

and if the issued shares are not all of the same class, the

apportionment between the shares under paragraph (a) above

shall be in accordance with their market values at the time they

were acquired by the member.

      (4)  

In this paragraph “the amount of the rolled-over gain” means the

25

lesser of—

(a)   

the amount of the syndicate capacity gain, and

(b)   

the aggregate amount of any sums which would be

allowable as a deduction under section 38(1)(a) of the

Gains Tax Act if the issued shares were disposed of as a

30

whole by the member in circumstances giving rise to a

chargeable gain.

      (5)  

In this paragraph the “issued shares” means the shares in the

successor company issued to the member in consideration for the

syndicate capacity disposal.

35

Capital gains tax: roll-over relief on disposal of assets of ancillary trust fund

4     (1)  

This paragraph applies if—

(a)   

at the time of, or after, the syndicate capacity disposal,

assets forming some or all of the member’s ancillary trust

fund are—

40

(i)   

withdrawn from the fund, and

(ii)   

without unreasonable delay, disposed of by him to

the successor company (the “ATF disposal”),

(b)   

the aggregate of any chargeable gains accruing to the

member on the ATF disposal exceeds the aggregate of any

45

allowable losses accruing to him on that disposal,

(c)   

throughout the period beginning with the time of the

syndicate capacity disposal and ending with the time of

the ATF disposal,—

 

 

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Schedule 25 — Lloyd’s names: conversion to limited liability underwriting

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(i)   

the member controls the successor company, and

(ii)   

more than 50% of the ordinary share capital of the

successor company is beneficially owned by the

member,

(d)   

the ATF disposal is made in consideration solely of the

5

issue to the member of shares (the “issued shares”) in the

successor company, and

(e)   

the member makes a claim under this paragraph to an

officer of the Board.

      (2)  

But this paragraph does not apply if—

10

(a)   

the member could have made a claim under paragraph 3

above, and

(b)   

at the time the member makes a claim under this

paragraph, no claim under paragraph 3 above is or has

been made by him.

15

      (3)  

The amount of the excess mentioned in sub-paragraph (1)(b)

above (“the amount of the ATF assets gain”) shall for the purposes

of capital gains tax be reduced by the amount of the rolled-over

gain.

      (4)  

For the purpose of computing any chargeable gain accruing to the

20

member on a disposal by him of any issued share or any asset

directly or indirectly derived from any issued share—

(a)   

the amount of the rolled-over gain shall be apportioned

between the issued shares as a whole, and

(b)   

the sums allowable as a deduction under section 38(1)(a) of

25

the Gains Tax Act shall be reduced by the amount

apportioned to the issued share under paragraph (a)

above; but, in the case of a derived asset, the reduction

shall be by an appropriate proportion of that amount;

           

and if the issued shares are not all of the same class, the

30

apportionment between the shares under paragraph (a) above

shall be in accordance with their market values at the time they

were acquired by the member.

      (5)  

In this paragraph “the amount of the rolled-over gain” means the

lesser of—

35

(a)   

subject to sub-paragraph (6) below, the amount of the ATF

assets gain, and

(b)   

the aggregate amount of any sums which would be

allowable as a deduction under section 38(1)(a) of the

Gains Tax Act if the issued shares were disposed of as a

40

whole by the member in circumstances giving rise to a

chargeable gain.

      (6)  

If the market value, immediately before the ATF disposal, of the

assets disposed of under that disposal exceeds the amount of the

ATF assets required, the amount of the ATF assets gain shall for

45

the purposes of sub-paragraph (5)(a) above be reduced by

multiplying it by—equation: over[char[R],char[T]]

           

where—

 

 

Finance Bill
Schedule 25 — Lloyd’s names: conversion to limited liability underwriting

404

 

R is the amount of the ATF assets required, and

T is the market value, immediately before the ATF disposal,

of the assets disposed of under that disposal.

      (7)  

In sub-paragraph (6) above “the amount of the ATF assets

required” means the lesser of—

5

(a)   

the amount of security required to be provided by the

member in respect of his underwriting business in the

member’s last underwriting year, and

(b)   

the amount of security required to be provided by the

successor company in respect of its underwriting business

10

in the successor company’s first underwriting year.

      (8)  

This paragraph applies only on the first occasion on or after 6th

April 2004 on which the member makes an ATF disposal.

      (9)  

If a claim made by the member under paragraph 3 above is

revoked, this paragraph shall apply as if the claim had never been

15

made.

Interpretation of this Part of this Schedule

5     (1)  

In this Part of this Schedule—

“control” shall be construed in accordance with section 416

of the Taxes Act 1988;

20

“ordinary share capital” has the meaning given by section

832(1) of the Taxes Act 1988;

“successor company” means a corporate member (within

the meaning of Chapter 5 of Part 4 of the Finance Act

1994) which is a successor member;

25

“the member’s last underwriting year” has the meaning

given by paragraph 1(7) above;

“the successor company’s first underwriting year” has the

meaning given by paragraph 1(6) above;

“the syndicate capacity disposal” has the meaning given by

30

paragraph 1(3) above;

“underwriting business”, in relation to a successor

company, has the same meaning as in Chapter 5 of Part 4

of the Finance Act 1994.

      (2)  

For the purposes of this Part of this Schedule, shares comprised in

35

any letter of allotment or similar instrument shall be treated as

issued unless—

(a)   

the right to the shares conferred by it remains provisional

until accepted, and

(b)   

there has been no acceptance.

40

      (3)  

Paragraphs 3 and 4 above (and paragraph 1 above so far as

relating to those paragraphs) are to be construed as one with the

Gains Tax Act.

 

 

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Schedule 25 — Lloyd’s names: conversion to limited liability underwriting

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Part 2

Conversion to underwriting through successor partnerships

Introduction

6     (1)  

This Part of this Schedule applies if the following conditions are

satisfied.

5

      (2)  

Condition 1 is that—

(a)   

a member gives notice of his resignation from membership

of Lloyd’s in accordance with the rules or practice of

Lloyd’s,

(b)   

in accordance with such rules or practice, the member does

10

not undertake any new insurance business at Lloyd’s after

the end of the member’s last underwriting year, and

(c)   

the member does not withdraw that notice.

      (3)  

Condition 2 is that all of the member’s outstanding syndicate

capacity is disposed of by the member under a conversion

15

arrangement to a successor partnership (“the syndicate capacity

disposal”) with effect from the beginning of the underwriting year

next following the member’s last underwriting year.

      (4)  

Condition 3 is that the member is the only person who disposes of

syndicate capacity under a conversion arrangement to the

20

successor partnership.

      (5)  

Condition 4 is that the successor partnership starts to carry on its

underwriting business in the underwriting year next following the

member’s last underwriting year.

      (6)  

In this paragraph “the member’s last underwriting year”, in

25

relation to a member who gives notice of his resignation from

membership of Lloyd’s, means the underwriting year during

which, or at the end of which, he ceases to be an underwriting

member and becomes a non-underwriting member in accordance

with the rules or practice of Lloyd’s.

30

      (7)  

In this paragraph “outstanding syndicate capacity”, in relation to

a member, means the syndicate capacity of the member other than

any which—

(a)   

the member disposes of to a person other than a successor

member at or before the end of the member’s last

35

underwriting year, or

(b)   

ceases to exist with effect from the end of that year.

Income tax: carry forward of loss relief following conversion

7     (1)  

This paragraph applies if—

(a)   

the member’s total income for a year of assessment

40

includes profits of the successor partnership’s

underwriting business, and

(b)   

throughout the period beginning with the time of the

syndicate capacity disposal and ending with the end of

that year of assessment, the member is beneficially entitled

45

to more than 50% of the profits of that business.

 

 

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Schedule 25 — Lloyd’s names: conversion to limited liability underwriting

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      (2)  

Section 385 of the Taxes Act 1988 (carry-forward of trading losses

against subsequent profits) shall have effect, in its application in

relation to the losses of the old underwriting business, as if the

profits of the successor partnership’s underwriting business to

which the member is beneficially entitled for that year were profits

5

on which the member was assessed under Schedule D in respect

of the old underwriting business for that year.

      (3)  

In sub-paragraph (2) above “the old underwriting business”

means the member’s underwriting business carried on otherwise

than through the successor partnership.

10

Interpretation of this Part of this Schedule

8          

In this Part of this Schedule—

           

“successor partnership” means a limited partnership formed

under the law of Scotland which is a successor member;

           

“the syndicate capacity disposal” has the meaning given by

15

paragraph 6(3) above.

Part 3

Supplementary provisions

Withdrawal of resignation notice

9     (1)  

This paragraph applies if a member—

20

(a)   

makes a claim for relief under or by virtue of this Schedule,

and

(b)   

subsequently withdraws the notice of his resignation from

membership of Lloyd’s.

      (2)  

The member must give written notice of such withdrawal to an

25

officer of the Board.

      (3)  

Such a notice must be given no later than six months from the date

of the withdrawal of the notice of resignation.

      (4)  

All such adjustments shall be made, whether by discharge or

repayment of tax, the making of assessments or otherwise, as are

30

required as a result of the withdrawal of the notice of resignation

(notwithstanding any limitation on the time within which any

adjustment may be made).

      (5)  

If a member fails, fraudulently or negligently, to comply with sub-

paragraphs (2) and (3) above, section 95 of the Taxes Management

35

Act 1970 shall apply to him as if he had fraudulently or negligently

made an incorrect return, statement or declaration in connection

with the claim for relief made by him under or by virtue of this

Schedule.

      (6)  

In this paragraph “tax” means income tax, capital gains tax or

40

inheritance tax.

Interpretation of this Schedule

10         

In this Schedule—

 

 

 
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