Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN10 Loss-buying

Who is likely to be affected?

1   Companies seeking to buy tax losses from loss-making corporate members of the Lloyd's insurance market who are ceasing their underwriting activities.

General description of the measure

2   Legislation will be introduced in Finance Bill 2007 to prevent companies buying the trading losses of corporate members of Lloyd's who are leaving the market and with which they have no previous economic connection.

3   The measure will stop companies gaining access to group relief where there is a change in the group relationship after the losses are known but before they are recognised for tax purposes.

Operative date

4   This measure will have effect for changes in the ownership of the loss-making company taking place on or after the date that Finance Bill 2007 receives Royal Assent.

Current law and proposed revisions

5   Group relief rules in Chapter 4 of Part 10 Income and Corporation Taxes Act 1988 allow one company that makes a trading loss to surrender it to another within the same group of companies or within a consortium framework. These losses must be current. They cannot be carried forward or back and then group relieved, and the necessary relationship must exist at the time that they arise.

6   A special accounting system used at Lloyd's recognises the profits or losses of, say, underwriting year 2005 in the calendar year 2008. The tax rules, which for corporate members of Lloyd's are in Chapter 5 of Part 4 of Finance Act 1994, follow the accounting rules so a loss of the underwriting year 2005 will arise for tax purposes in 2008. This enables the group relationship to be changed in the interim with the benefit of foresight of relievable losses, contrary to group relief principles.

7   This measure will require the relationship on which the claim depends to be maintained between the last day of the underwriting year in which the insurance business giving rise to the loss claimed was written, and the first day of the year in which the loss is recognised, or "declared".

Further advice

8   If you have any questions about this change, please contact Simon Claydon, 020 7147 2545 (email: or Victor Baker, 020 7147 2616 (email: Information about Budget measures is available on the HM Revenue & Customs website at