LLM8070 | Capital gains: Names: syndicate capacity: disposals: syndicate mergers

Where two or more syndicates merge and the Names who participated on the mergingsyndicates neither receive cash as a result of the merger nor pay cash to continueunderwriting in the merged syndicate in the following underwriting account, this is not achargeable disposal for capital gains tax purposes.

When a Name sells capacity in the new, merged syndicate, this is a chargeable disposal inthe same way as other sales of capacity, and the cost of acquisition is the cost to themember of the capacity in the pre-merger syndicate. As with other disposals, bespokecapacity and capacity held via a MAPA in the same syndicate are regarded as separateassets (LLM8150).

For instance, Name A had participated at the same level on syndicate X since the 1990account. In 2000, syndicates X and Y merged, and continued underwriting as syndicate Y inthe 2001 account. No cash changed hands. When Name A sells all his syndicate Y capacity inthe 2007 auctions, the cost of acquisition will be the cost of his syndicate X capacity,in this case, nil, since it was acquired before capacity could be bought and sold.

If the Name receives cash as a result of a merger, this amounts to a part disposal ofcapacity in the pre-merger syndicate for capital gains tax purposes. If the Name pays cashto continue on the merged syndicate, this will be an additional cost of acquiring thecapacity in the merged syndicate.