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Fidentia Services LLP provides an administrative service for Namecos and Limited Liability partnerships (LLPs) underwriting at Lloyd's.

This includes all the management and administration services necessary to ensure the proper management and conduct of each vehicle. We deal with all the compliance, accounting, audit arrangements and HM Revenue & Customs reporting. Fidentia can also assist with the administration of a company after its Lloyd's affairs have been completed.

For 2014, Fidentia charges an annual fee of £2,700 + VAT for a
Nameco or LLP.

The information contained herein is provided in good faith and is believed to be correct. However this is a general guide only and should not be regarded as a substitute for detailed advice. Fidentia Services LLP, Duncan & Toplis, their partners, directors or employees accept no liability for any losses occasioned to any persons acting or refraining from acting on the basis of the material contained or omitted. Professional advice should always be sought before undertaking any transactions. Please note that the tax information relates to UK-resident individuals only.

For further information please contact Duncan & Toplis:
Mike Argyle on T: 01476 591200 E: mike.argyle@duntop.co.uk
Tom Hindmarch on T: 01780 750888 E: tom.hindmarch@duntop.co.uk
Rebecca Bright on T: 01476 591200 E: rebecca.bright@duntop.co.uk

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Fidentia was formed in 2008 by Alpha Insurance Analysts Limited (Alpha) and Duncan & Toplis (D&T) to provide a one-stop administration, accounts, tax and audit service for LLPs and Namecos underwriting at Lloyd's.

Fidentia works closely with Alpha in both London and Chatham to provide a timely and efficient management operation to run alongside the Members' Agent and advisory services provided to members of Lloyd's by Alpha. As with Alpha, our objective is to set a new benchmark for service in this area, exceeding that experienced by underwriting members in the past.

We also now look after several entities who retain a Members' Agent other than Alpha. Fidentia does not look after any Scottish Limited Partnerships.

Fidentia has at its disposal the accounting and tax expertise of D&T, a top 40 accountancy firm, with over 40 years experience of dealing with Lloyd's Members.

Independent audit will be provided by Humphrey and Co, also a firm with many years experience of Lloyd's affairs. By virtue of having to prepare accounts under schedule 3 of the Companies Act 2006, LLPs and Namecos at Lloyd's are not able to take advantage of audit exemptions available to small companies: the audit therefore is compulsory.

The service provided by Fidentia will consist of the following:

  • Bookkeeping and accounts preparation.
  • Annual audit.
  • Preparation of annual tax return for the LLP or Nameco.
  • Provision of two designated members for LLPs and director/company secretary for Namecos to deal with Lloyd's and Companies Act requirements and administrative matters.
  • Provision of sterling and US dollar client bank accounts, with HSBC, for each LLP or Nameco.
  • In conjunction with the Members' Agent, ensuring compliance with Lloyds's regulations.

Preparation of tax returns for persons other than the underwriting LLP or Nameco is not included, but D&T will be happy to provide quotations for these, together with any ad hoc tax advice that members and/or the LLP/Nameco may require on an individual basis.

The above services are provided on a fixed fee basis per year of account. The fees for the 2014 year are £2,700 + VAT (£3240) for a Nameco or LLP. Fees are invoiced in September of the year of account.

LLPs and Namecos will be asked to sign a Management Agreement reflecting the above terms. Changes in fees for the following year of account will be notified to clients by the preceding 30th April.

Corporate capital was introduced into the market for the 1994 account and the first unlimited members began to convert to limited liability underwriting status in 1996 with the introduction of Scottish Limited Partnerships. Namecos were introduced for the 1997 account and this meant that members could underwrite on a limited liability basis through a limited company over which they had 100% control. LLPs were available from 2007.

All new investors at Lloyd's must invest on a limited liability basis and this can be either as a Nameco or as a Limited Liability Partnership (LLP). Existing unlimited liability members can also convert their underwriting into either a Nameco or a LLP. Subject to various conditions, this conversion can be undertaken without interruption to the unlimited liability members' entitlement to Entrepreneur's Relief (Capital Gains Tax) on their syndicate capacity and Business Property Relief (Inheritance Tax) on their overall Lloyd's interest.

Income taxes are paid on profits approximately three years in arrears for example, profits arising in the Lloyd's accounting year to 31 December 2010 will be taxed in the year ended 31 December 2013 for a Nameco and the tax year 2013/14 for members ('partners') of a LLP. Taxable figures are based on the profits accrued in the relevant year, irrespective of when the cash is paid out to underwriting members.

Many of the Namecos and LLPs currently administered by Fidentia Services LLP are members through Alpha Insurance Analysts members' agency.

  • A single individual or a group can participate in a Nameco.
  • The minimum funding requirement for a new-money Nameco is £350,000. The minimum funding requirement for a single unlimited member converting to a Nameco is £100,000.
  • Namecos can be set up new, or can be purchased from existing owners, subject to availability.
  • Namecos are liable to pay corporation tax on any profits or capital gains realised during an accounting period at the normal corporation tax rates.
  • The Nameco can choose to retain its underwriting profits, or pay some or all of them out as dividends or salary. Dividends carry a tax credit which is deemed to cover a tax payer's basic rate liability. Higher rate tax payers will be subject to a further liability, depending on the level of the individual shareholder's other income.
  • Losses sustained by the underwriting activities of the Nameco can be carried back for one year or carried forward and offset against future profits of the company. They cannot be relieved against non-Lloyd's income of the shareholders.
  • Ownership of the Nameco can be bequeathed on death so that the company can continue to underwrite at Lloyd's.
  • If the owner of the Nameco wishes to resign from the market, then the entire company can be sold, although there is not currently a very liquid market. The potential price of such a sale would include the value of the syndicate capacity and a proportion of the pipeline profits.
  • When a Nameco ceases to underwrite, Lloyd's requires the company to remain in existence as a dormant entity. If this stage is reached, then Fidentia are able to arrange this administrative service for a one-off fixed fee at the time.
  • Entrepreneur's Relief may be available to shareholders on the sale of their entire stake in a Nameco. Please see tax section for more information regarding disposals.
  • Shares in a Nameco can be gifted and bequeathed. Holdover relief for gains may be available on gifts.
  • The Lloyd's set-up cost of a new-money 'family' Nameco is £5,000 (for up to 4 controllers of the Nameco with a charge of £155 per additional Controller). The Lloyd's set-up cost for an unrelated group is £25,000. The Lloyd's set-up cost of converting into a new Nameco with interavailable funds is £2,000 plus £155 for the converting member and each additional Controller. Similarly, the Lloyd's set-up cost for a re-starting member into a new Nameco (or existing unlimited member with a new Nameco) is £2,000.
  • LLPs were introduced for the 2007 account, so that individuals could underwrite at Lloyd's within an English Limited Liability Partnership.
  • A single individual or a group can form a LLP.
  • The minimum funding requirement for a new-money LLP is £350,000, subject to an average of at least £100,000 per underwriting partner. The minimum funding requirement for a single unlimited member converting to a LLP is £100,000.
  • Underwriting profits are deemed to be earned income and are taxed as such. Earnings from the LLP are pensionable subject to any maximum contribution levels which may appertain to an individual's circumstances at the time and are dealt with and taxed at individual partner level and not at LLP level.
  • A partner's trading losses can be offset against a partner's share of gains and future profits made by the LLP, or against his/her other income in the current or previous tax year.
  • If a partner wishes to resign from the LLP, the share is first offered to the other underwriting partners. If all underwriting partners wish to cease involvement then the LLP may be sold to a third party, although there is not currently a very liquid market. Alternatively, the capacity can be sold at auction and the LLP liquidated with cash from realised assets and pipeline profits, as they are paid out by Lloyd's, being distributed to the partners.
  • When a LLP ceases to underwrite, Lloyd's requires it to remain in existence as a dormant entity. If this stage is reached, then Fidentia are able to arrange this administrative service for a one-off fixed fee at the time.
  • 100% Business Property Relief is available on a partner's share of the underwriting capital and assets of a LLP after 2 years of trading. This reduces the inheritance tax liability on a partner's estate.
  • When a partner disposes of the entire interest in a LLP, Entrepreneur's Relief may be available. Please see the tax section for more information.
  • The Lloyd's set-up cost of a new-money single or 'family' members LLP is £5,000 (for up to 4 LLP members with a charge of £155 per additional LLP member). The Lloyd's set-up cost of converting into a new LLP with interavailable funds is £2,000 plus £155 for the converting member and each additional LLP member. The Lloyd's set-up cost of a re-starting member into a new LLP (or existing unlimited member with a new LLP) is £2,000. An unconnected group will be charged a Lloyd's set-up fee of £25,000.

When am I taxed?

Lloyd's profits are taxed on a three year time lag. The underwriting result (net of expenses) for the 2014 calendar year will be taxed in 2017 year to 31st December 2017 for Namecos, and tax year 2017/18 for LLP members.

Sales of capacity are subject to capital gains tax in the (tax) year of sale.

Taxes on Income

LLPs

Whilst the LLP is a limited liability entity, it does not exist for tax purposes.

Therefore, for LLP members, the tax treatment is the same as for any partnership each member is taxed on their share of the profits, regardless of whether these are withdrawn from the LLP, at their highest marginal rate of tax. They will also be liable to Class 2 and Class 4 National Insurance Contributions, where applicable.

New legislation, to be enacted in Summer 2014, will restrict the amount of LLP profits which can be allocated to non-natural members of LLPs (i.e. trusts or companies), where the LLP also contains individuals as members. If you would like to have a non-natural person as a member of a LLP, this new legislation must be considered in detail before setting up a structure such as this.

Converting Names may have an existing Special Reserve Fund (SRF). SRF may not be added to from LLP profits. In principle, it will be released once all open years for the unlimited Name have closed and will be taxable in full at that time.

The income earned from the LLP will be 'pensionable' income for the LLP members, under current pension legislation.

It is currently possible for LLPs to make a tax-deductible notional transfer to a Claims Equalisation Reserve (CER).

Namecos

A Nameco is again a limited liability vehicle. However, a Nameco has a separate tax identity of its own and, as a result, pays corporation tax on its underwriting profits. This will be at the more attractive current tax rates of 20%/23%, rather than the potential current income tax rates of 40%/45% in a LLP.

As with the LLP, it is also possible for Namecos to make CER transfers.

As the Nameco is a separate legal entity with its own tax liability, the post-tax profits in the company can either be used to:

  • Increase cash reserves or investments within the company.
  • Repay any loans owed to shareholders/directors.
  • Pay salary or pension contributions.
  • Pay dividends.

If you are currently looked after under a Nomina agreement, you will need to give notice by 31st December 2014 to be able to join us on 1st January 2016. Although your bookkeeping will transfer to us on that date, Nomina will still be responsible for preparing and auditing your annual accounts for periods up to 31st December 2015. We will then prepare and audit your accounts for the period to 31st December 2016.

Nomina's current position is that they will not let clients out of their agreement with them without the full 12 months minimum notice period being adhered to.

For further information please contact:
Mike Argyle on T: 01476 591200 E: mike.argyle@duntop.co.uk
Tom Hindmarch on T: 01780 750888 E: tom.hindmarch@duntop.co.uk
Rebecca Bright on T: 01476 591200 E: rebecca.bright@duntop.co.uk
Richard Cocks on T: 01476 591200 E: richard.cocks@duntop.co.uk

Click here to download the contact details of the Fidentia Team

Fidentia Services LLP

Registered address:3 Castlegate, Grantham, Lincolnshire, NG31 6SF.
Registered company number: OC337225.

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