HMRC take the view that where a Name is entitled to receive a payment in settlement of a claim for compensation or damages for an underwriting loss, the payment is a trading receipt. It is irrelevant whether or not the payment is actually received. HMRC's view is that compensation arising from any legal action connected with, or arising from, membership of Lloyd's is taxable trading income for the tax year in which the calendar year of receipt falls (regardless of the underwriting account that gave rise to the action)1.
This view was supported by the decision in Deeny v Gooda Walker Ltd2 in which the House
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