(1)This section applies if—
(a)at a time in a tax year (“the relevant tax year”) an individual carries on a trade (“the relevant trade”) as a limited partner in a firm, and
(b)the individual makes a loss in the relevant trade in the relevant tax year.
(2)There is a restriction on the amount of relief within subsection (3) which may be given to the individual for the loss.
(3)The relief within this subsection is—
(a)sideways relief against the individual's income apart from profits of the relevant trade, and
(b)capital gains relief.
(4)The restriction is that—
(a)the sum of the amount of the relief given and the total amount of all other relevant relief given, less
(b)the total amount of recovered relief,
must not exceed the individual's contribution to the firm as at the end of F1... the relevant tax year (see section 105).
(5)“Relevant relief” means sideways relief or capital gains relief given to the individual for—
(a)a loss made in the relevant trade in a tax year at a time during which the individual carries on that trade as a limited partner, or
(b)a loss made in the relevant trade in an early tax year during which the individual carries on that trade as a non-active partner F2....
(6)“The total amount of recovered relief” means the total amount of income treated as received by the individual under section 792 (recovery of excess relief) as a result of the application of that section in relation to claims for relief for losses made by the individual in the relevant trade.
(7)If the firm is carrying on, or has carried on, other trades apart from the relevant trade, for the purpose of determining the total amount of all other relevant relief and the total amount of recovered relief—
(a)apply subsection (5) in relation to each other trade as well as the relevant trade and then add the results together, and
(b)apply subsection (6) as if the reference to the relevant trade were a reference to the relevant trade or any of the other trades.
Textual Amendments
F1Words in s. 104(4) omitted (6.4.2024 for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2022 (c. 3), Sch. 1 paras. 50, 61(1)
F2Words in s. 104(5) repealed (retrospective to 6.4.2007) by Finance Act 2007 (c. 11), Sch. 4 paras. 10(a), 21, Sch. 27 Pt. 2(1)
(1)For the purposes of section 104 the individual's contribution to the firm is the sum of amounts A and B.
(2)Amount A is the amount which the individual has contributed to the firm as capital less so much of that amount (if any) as is within subsection (4).
(3)In particular, the individual's share of any profits of the firm is to be included in the amount which the individual has contributed to the firm as capital so far as that share has been added to the firm's capital.
(4)An amount of capital is within this subsection if it is an amount which—
(a)the individual has previously drawn out or received back,
(b)the individual is or may be entitled to draw out or receive back at any time when the individual is carrying on a trade as a limited partner in the firm, or
(c)the individual is or may be entitled to require another person to reimburse to the individual.
(5)In subsection (4) any reference to drawing out or receiving back an amount is to doing so directly or indirectly but does not include drawing out or receiving back an amount which, because of its being drawn out or received back, is chargeable to income tax as profits of a trade.
(6)Amount B is the amount of the individual's total share of profits within subsection (7) except so far as—
(a)that share has been added to the firm's capital, or
(b)the individual has received that share in money or money's worth.
(7)Profits are within this subsection if they are from the relevant trade.
(8)In determining the amount of the individual's total share of profits within subsection (7) ignore the individual's share of any losses from the relevant trade which would (apart from this subsection) reduce that amount.
(9)In subsections (3), (7) and (8) any reference to profits or losses are to profits or losses calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits or losses for income tax purposes).
(10)If the firm is carrying on, or has carried on, other trades apart from the relevant trade, subsections (7) and (8) have effect as if references to the relevant trade were references to the relevant trade or any of the other trades.
(11)This section needs to be read with [F3section 113A and any regulations made under section 114 (exclusion of amounts] in calculating the individual's contribution to the firm for the purposes of section 104).
Textual Amendments
F3Words in s. 105(11) substituted (retrospective to 6.4.2007) by Finance Act 2007 (c. 11), Sch. 4 paras. 11(a), 21
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Textual Amendments
F4S. 106 repealed (retrospective to 6.4.2007) by Finance Act 2007 (c. 11), Sch. 4 paras. 12, 21, Sch. 27 Pt. 2(1)