Members should note that the Finance Act 2013 introduced a provision that may limit inheritance tax Business Property Relief (“BPR”) on Lloyd’s assets in certain circumstances.
Where a member takes out a new bank guarantee or letter of credit after 5th April 2013 (or makes changes to an existing one) we have become aware that HMRC’s view is that a liability is created that should be deducted from their Lloyd’s underwriting assets (which receive 100% BPR), rather than from their other (non-BPR) assets, thus increasing the value of their estates for inheritance tax purposes by the value of the guarantee or letter of credit.
In the run-up to coming-into-line, or indeed thereafter, it is therefore important for members to seek advice from their Lloyd’s tax advisers before making any changes to their Lloyd’s bank guarantees or letters of credit.
