Introducing a Lloyds Limited Liability Partnership (LLP)
A LLP is a limited liability method by which a group of individuals can underwrite insurance risks at Lloyds. 

How does a LLP work?

• The LLP is established and members of the partnership pledge assets to the company to support underwriting at Lloyds.
• Assets are deposited as Funds at Lloyds (FAL). FAL are usually 40% (minimum £350,000) of the aggregate premium the LLP may underwrite (its premium income limit).
• FAL can include cash, shares, letters of credit, and bank guarantees.
• The LLP purchases syndicate capacity at a Lloyds auction and underwrites risks to a maximum of its premium income limit.
• Only the assets of the LLP are at risk.
• Members can make a return on profitable underwriting while continuing to benefit from assets supporting their underwriting capacity.

Example: A LLP underwrites a premium income limit of £1m and deposits £400,000 as FAL.  In 2009 it makes a profit of 5% (£50,000) of premium income limit.  This is equal to a return of 12.5% on FAL.  The LLP can make an additional return on its FAL, in the form of capital growth and/or dividend income.

HAL
HAL acts as the Members agent for over 300 LLPs, providing advice on underwriting affairs, including syndicate recommendations, structuring portfolios, and analytical services.  HALs sister company, Nomina Plc provides the LLP with its two designated members, its company secretary, and its registered address.  It also arranges the production of accounts in accordance with schedule 9A of the Companies Act, handles audit and legal services, and fulfils annual filing requirements with the Inland Revenue and Companies House.

Costs
The establishment cost charged by Lloyds, HAL, and Nomina is £10,000. The cost of purchasing capacity at auction may be estimated at £200,000, depending on the syndicates selected and the availability of capacity.  Additional annual charges are itemised in HALs brochure, An Invitation to Participate in Limited Liability Partnerships at Lloyds . Our Member Executives can explain further the methods of joining without obligation.

Tax
LLPs are tax transparent on income and chargeable gains in the UK.  Once a profit is determined, it is allocated in accordance with the members agreement.  It is regarded as members direct income and is subject to income tax.

Income is deemed to be earned income for pension purposes.  Members can pay all or part of the profit into their personal pension plan (subject to the annual contributions limit) gaining full relief against the income tax otherwise payable.

In the event of an underwriting loss, members are entitled to claim relief against their other income.  Relief is limited to the amount of capital at risk to the LLP.  Any loss in excess of this can be carried forward and set against future profits.

Subject to the usual conditions, the assets of a member of a LLP qualify for 100% Business Property Relief.  If an interest in a LLP is bequeathed to a beneficiary who is then admitted as a member, the interest in the partnership is transferred on death and the beneficiary is entitled to profits and liable for losses in place of the deceased member.

For further tax information please contact Hampden Tax.

Conversion
Subject to certain conditions, Lloyd's Members trading with unlimited liability can convert to either a LLP or a Nameco without interruption to their status for Business Asset Taper Relief (Capital Gains Tax) on their syndicate capacity and Business Property Relief (IHT) on their total Lloyd's interests. They can also carry forward unrelieved losses from sole trading against income from either limited liability vehicle.

Dates for establishing a LLP
Applications for new LLPs must be received by the 31^st of August but should be made no later than the end of July to ensure that the LLP is approved in time for the Lloyds capacity auctions in September.  Funds at Lloyds must be deposited by the end of November.

Capital invested is at risk as it is exposed to underwriting losses.
Current tax legislation may be subject to amendment and change.

For further information please contact:
Neil Smith
Hampden Agencies Limited
85 Gracechurch St
London EC3V 0AA
T: +44 (0) 207 7863 6500
Neil.Smith@hampden.co.uk