Income Tax Act 2007

107 Restriction on reliefs for members of LLPs

(1) This section applies if—

(a) an individual carries on a trade (“the relevant trade”) as a member of an LLP at a time in a tax year, and

(b) the individual makes a loss in the relevant trade in the tax year (“the relevant tax year”).

(2) But if the relevant tax year is an early tax year during which the individual carries on the relevant trade as a non-active partner (see section 112)—

(a) this section does not apply, and

(b) section 110 applies instead.

(3) There is a restriction on the amount of relief within subsection (4) which may be given to the individual for the loss.

(4) 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.

(5) 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 LLP as at the end of the basis period for the relevant tax year (see section 108).

(6) “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 member of an LLP, 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.

(7) “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.

(8) If the LLP 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 (6) in relation to each other trade as well as the relevant trade and then add the results together, and

(b) apply subsection (7) as if the reference to the relevant trade were a reference to the relevant trade or any of the other trades.