LLM5240 - Names: special reserve funds: transfers in

Transfers into the SRF are covered by the legislation at FA93/SCH20/PARA3, as amended by SI1999/3308 for transfers made on or after 1 January 2000.

Transfers on or after 1 January 2000

For transfers on or after 1 January 2000, SI1999/3308 amended FA93/SCH20/PARA3. Transfers into the SRF can now be made up to the lesser of

  • 50% of any overall syndicate profit, or
  • the amount required to bring the value of the fund to 50% of the overall premium limit (OPL) for the closing year or for the previous year, whichever is higher.

Overall premium limit is defined in FA93/SCH20/PARA1 as the maximum amount of business which, under Lloyd’s rules, a member may accept for an underwriting year.

The overall syndicate profit is the aggregate of the Name’s share of the commercial profit or loss for each of the syndicates in which the Name participated for the account for which the transfer is to be made. This profit is calculated after adding back the deduction for members’ agent’s fees and for contributions to the Lloyd’s Charities Trust shown in the syndicate accounts.

The value of the fund for this purpose is the value at the end of the closing year for the account. For example, for transfers from 2003 account profits, it is the value of the fund at 31 December 2005, the date the 2003 account closed.

LLM5250 gives an example of the amount of a transfer in to a SRF.

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Transfers in: time limits

Transfers must be made direct from the premium trust fund prior to distribution of profits. A strict time limit applies for making a transfer into the SRF and this is the earlier of the following two dates

  • the date on which profits, or any part of the profits, are distributed to the Name; and
  • 31 October of the year in which the profits are distributed.

Giving effect to transfers made after the time limit is a matter for HMRC discretion: in practice, Lloyd’s Members’ Funds Department can refuse applications for late transfers without consulting High Net Worth Unit (Shipley), but cannot accept late transfers without authority from the Unit.