§ Lord Desaiasked Her Majesty's Government:
Whether the Inland Revenue has agreed that the premium which Names at Lloyd's may be asked to pay under the proposed Equitas plan will be allowable for tax against gross income of Names for the tax year 1993–94, and if so what estimate they have made of the cost to the Revenue of tax which would have to be repaid.
§ Lord Mackay of ArdbrecknishLloyd's has not yet finalised the details of the arrangements under which Names may be asked to pay premiums under the proposed Equitas plan. Accordingly, although the Inland Revenue are engaging in preliminary discussions with Lloyd's on this subject. it is not yet possible for the Inland Revenue to confirm the correct tax treatment of any such premium.
Accounts of Lloyd's syndicates either show the payment of a premium for reinsurance to close or (in cases where the syndicate is not closed) the reserves made for outstanding liabilities. These are deductible for tax purposes provided they are computed on an acceptable basis. Any premiums payable to Equitas would take the place of these arrangements. To the extent that such premiums are allowable for tax purposes, it will be as a deduction in computing the trading profits or losses of the Names concerned for 91WA 1993–94. If this gives rise to an overall trading loss for the year in question then that will be relievable in the normal way.