PART IV PROVISIONS RELATING TO THE SCHEDULE D CHARGE

CHAPTER VII PARTNERSHIPS AND SUCCESSIONS

Limited partners

117 Restriction on relief: individuals.

(1)

M1An amount which may be given F1. . . to an individual under section F2. . . 380 or 381 below F3. . . —

(a)

in respect of a loss sustained by him in a trade F4. . . in a relevant year of assessment;F5. . .

(b)

F5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

may be given F1. . . otherwise than against income consisting of F6profits arising from the trade only to the extent that the amount given F1. . . or (as the case may be) the aggregate amount does not exceed the relevant sum.

(2)

M2In this section—

“limited partner” means—

  1. (i)

    a person who is carrying on a trade as a limited partner in a limited partnership registered under the M3Limited Partnerships Act 1907;

  2. (ii)

    a person who is carrying on a trade as a general partner in a partnership, who is not entitled to take part in the management of the trade and who is entitled to have his liabilities, or his liabilities beyond a certain limit, for debts or obligations incurred for the purposes of the trade discharged or reimbursed by some other person; or

  3. (iii)

    a person who carries on a trade jointly with others and who, under the law of any territory outside the United Kingdom, is not entitled to take part in the management of the trade and is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade;

“relevant year of assessment” means a year of assessment at any time during which the individual carried on the trade as a limited partner;

“the aggregate amount” means the aggregate of any amounts given F7. . . to him at any time under section F8. . . 380 or 381 below F9. . . —

(a)

in respect of a loss sustained by him in the trade F10. . . in a relevant year of assessment F11or a qualifying year of assessment within the meaning of section 118ZE; F12. . .

(b)

F12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F13less the amount of any reclaimed relief at that time;

F14“the amount of any reclaimed relief” at any time means the total of any amounts at that time which the individual has been treated as receiving under section 74 of the Finance Act 2005 (recovery of excess relief given under section 380 or 381) as a result of the application of that section of that Act to him in respect of losses sustained by him in the trade;

“the relevant sum” means the amount of his contribution to the trade as at the appropriate time; and

“the appropriate time” is the end of the relevant year of assessment in which the loss is sustained F15. . . or for which the allowance falls to be made (except that where he ceased to carry on the trade during that year of assessment it is the time when he so ceased).

(3)

M4A person’s contribution to a trade at any time is the aggregate of—

(a)

the amount which he has contributed to it as capital and has not, directly or indirectly, drawn out or received back (other than anything which he is or may be entitled so to draw out or receive back at any time when he carries on the trade as a limited partner or which he is or may be entitled to require another person to reimburse to him), and

(b)

the amount of any F6profits of the trade to which he is entitled but which he has not received in money or money’s worth.

(4)

M5To the extent that an allowance is taken into account in computing F6profits or losses in the year of the loss by virtue of section 383(1) it shall, for the purposes of this section, be treated as falling to be made in the year of the loss (and not the year of assessment for which the year of loss is the basis year).

F16(5)

This section is subject to provision made by regulations under section 118ZN (partners: meaning of “contribution to the trade”).

118 Restriction on relief: companies.

(1)

M6An amount which may be given F17. . . under section 338, F18393A(1) or F19403 below F20. . . —

(a)

in respect of a loss incurred by a company in a trade, or of charges paid by a company in connection with the carrying on of a trade, in a relevant accounting period; F21. . .

(b)

F21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

may be given F17. . . to that company (“the partner company”) otherwise than against F22profits arising from the trade, or to another company, only to the extent that the amount given F17. . . or (as the case may be) the aggregate amount does not exceed the relevant sum.

(2)

M7In this section—

“relevant accounting period” means an accounting period of the partner company at any time during which it carried on the trade as a limited partner (within the meaning of section 117(2));

“the aggregate amount” means the aggregate of any amounts given F23. . . to the partner company or another company at any time under section 338, F24393A(1) or F19403 below F25. . . —

(a)

in respect of a loss incurred by the partner company in the trade, or of charges paid by it in connection with carrying it on, in any relevant accounting period; F26. . .

(b)

F26. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

“the relevant sum” means the amount of the partner company’s contribution (within the meaning of section 117(3)) to the trade as at the appropriate time; and

“the appropriate time” is the end of the relevant accounting period in which the loss is incurred or the charges paid or for which the allowance falls to be made (except that where the partner company ceased to carry on the trade during that accounting period it is the time when it so ceased).