Investors in the Lloyd’s of London market usually restrict their liability by using a limited liability company such as a “Nameco” or by using a “Limited Liability Partnership” (an LLP).
A “Nameco” is a UK private limited company subject to corporation tax and trades as a “corporate” member of Lloyd’s. As UK corporation tax rates are (currently 20% and due to fall to 18% by 2020) one of the lowest in the G20 this corporate form of entity can be very tax-efficient for investors. The UK has one of the widest tax treaty networks in the world thus avoiding double taxation on income, profits or withholding tax on dividends and interest. The UK does not levy any withholding taxes on dividends paid from the UK to any other jurisdiction in the world. UK “international holding companies” have added advantages in that for “trading” groups there is exemption from capital gains tax on disposal of substantial shareholdings (> 10% ). Also, dividends from foreign subsidiaries are “exempt” in the hands of the UK HoldCo. Therefore, through proper structuring using UK companies foreign investors in Lloyds can obtain significant benefits in capital and revenue preservation.
An LLP on the other hand, even though having a corporate persona, is “tax transparent” in the UK in that the taxation is dependent on where the “members” of the LLP are resident, rather than on the LLP itself. The members may be individuals or may be corporate entities. UK resident members will be subject to UK taxation but overseas resident members will be outside the scope of UK tax. This particular tax structure of an LLP along with the ability of each member to “ring fence” their liability can be very attractive to foreign investors.
RKG Consulting will be pleased to advise potential investors on the tax advantages of using Namecos or LLPs in more detail and on any other accounting or tax issues concerning Lloyd’s.