Income and Corporation Taxes Act 1988

118 Restriction on relief: companies. U.K.

(1) M1 An amount which may be given F1 . . . under section 338, [F2 393A(1)] or [F3 403] below F4 . . . —

(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; F5 . . .

(b) F5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

may be given F1 . . . to that company (“the partner company”) otherwise than against [F6 profits] arising from the trade, or to another company, 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) M2 In this section—

• [F7 “limited partner” means—

  (a)

  a company which is carrying on a trade as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907;

  (b)

  a company which—

  (i)

  is carrying on a trade as a general partner in a partnership;

  (ii)

  is not entitled to take part in the management of the trade; and

  (iii)

  is entitled to have its liabilities, or its liabilities beyond a certain limit, for debts or obligations incurred for the purposes of the trade discharged or reimbursed by some other person; or

  (c)

  a company which carries on a trade jointly with others and which, under the law of any territory outside the United Kingdom—

  (i)

  is not entitled to take part in the management of the trade; and

  (ii)

  is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade;]

• “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 F8 . . . ;

• “the aggregate amount” means the aggregate of any amounts given F9 . . . to the partner company or another company at any time under section 338, [F10 393A(1)] or [F3 403] below F11 . . . —

  (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; F12 . . .

  (b)

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

• “the relevant sum” means the amount of the partner company’s contribution F13 . . . 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).

[F14 (3) A partner company's contribution to a trade at any time is the aggregate of—

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

(b) the amount of any profits of the trade to which the partner company is entitled but which it has not received in money or money's worth.]

Textual Amendments

F1 Words in s. 118(1) repealed (with effect in accordance with s. 579 of the repealing Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 23(1)(a), Sch. 4

F2 Words in s. 118(1) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 73(3)-(5), Sch. 15 para. 4(a)(in relation to losses incurred in accounting periods ending on or after 1.4.1991)

F3 Words in s. 118(1)(2) substituted (with effect in accordance with s. 38(2)(3) of the amending Act) by Finance Act 1998 (c. 36), Sch. 5 para. 35

F4 Words in s. 118(1) repealed (with effect in accordance with s. 579 of the repealing Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 23(1)(b), Sch. 4

F5 S. 118(1)(b) and preceding word repealed (with effect in accordance with s. 579 of the repealing Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 23(1)(c), Sch. 4

F6 Words in s. 118(1) substituted (31.7.1998) by Finance Act 1998 (c. 36), s. 46(3)(a)(b), Sch. 7 para. 1

F7 S. 118(2): definition of "limited partner" inserted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 14(2) (with Sch.. 2)

F8 Words in s. 118(2) repealed (6.4.2007 with effect in accordance with s. 1034(1) of the repealing Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 14(3), Sch. 3 Pt. 1 (with Sch. 2)

F9 Words in s. 118(2) repealed (with effect in accordance with s. 579 of the repealing Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 23(2)(a) {Sch. 4} (with Sch. 2 para. 23(3))

F10 Words in s. 118(2) substituted by Finance Act 1991 (c. 31, SIF 63:1), s. 73(3)-(5), Sch. 15 para. 4(b)(in relation to losses incurred in accounting periods ending on or after 1.4.1991)

F11 Words in s. 118(2)(b) repealed (with effect in accordance with s. 579 of the repealing Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 23(2)(b), Sch. 4 (with Sch. 2 para. 23(3))

F12 S. 118(2)(b) and preceding word repealed (with effect in accordance with s. 579 of the repealing Act) by Capital Allowances Act 2001 (c. 2), Sch. 2 para. 23(2)(c), Sch. 4 (with Sch. 2 para. 23(3))

F13 Words in s. 118(2) repealed (6.4.2007 with effect in accordance with s. 1034(1) of the repealing Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 14(4), Sch. 3 Pt. 1 (with Sch. 2)

F14 S. 118(3) inserted (6.4.2007 with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), Sch. 1 para. 14(5) (with Sch. 2)

Marginal Citations

M1 Source—1985 Sch.12 3(1)-(3)

M2 Source—1985 Sch.12 3(4), 1, 4