Corporation Tax Act 2010 (c. 4)

Part 4 U.K. Loss relief

Modifications etc. (not altering text)

C1 Pt. 4 modified (with effect in accordance with reg. 1(2) of the amending S.I.) by The Risk Transformation (Tax) Regulations 2017 (S.I. 2017/1271), regs. 1(1), 10

C2 Pt. 4 excluded (14.7.2022) by Energy (Oil and Gas) Profits Levy Act 2022 (c. 40), s. 1(5)(e) (with ss. 15(1), 16(1))

Chapter 3 U.K. Limited partners and members of limited liability partnerships

Limited partners U.K.

56 Restriction on reliefs for limited partners U.K.

(1) This section applies if—

(a) at any time in an accounting period a company carries on a trade (“the limited partnership trade”) as a limited partner in a firm, and

(b) the company makes a loss in the limited partnership trade in that period (“the loss-making period”).

(2) There is a restriction on the amount of relief that may be given for the loss—

(a) under section 37 [F1 or 45A] (relief for trade losses against total profits) other than against profits of the limited partnership trade, F2 ...

(b) under Part 5 (group relief)[F3 , or

(c) under Part 5A (group relief for carried-forward losses)]

(3) The restriction is that the sum of—

(a) the amount of the relief given, and

(b) the total amount of all other relief within subsection (4),

must not exceed the company's contribution to the firm as at the time mentioned in subsection (5).

(4) Relief is within this subsection if it is given under section 37 [F4 or 45A] or Part 5 [F5 or 5A] for a loss made in the limited partnership trade by the company in an accounting period at any time during which it carries on that trade as a limited partner.

(5) The time referred to in subsection (3) is—

(a) the end of the loss-making period, or

(b) if the company ceases to carry on the limited partnership trade during that period, the time when it does so.

(6) If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the limited partnership trade and then add the results together.

Textual Amendments

F1 Words in s. 56(2)(a) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(2)(a)

F2 Word in s. 56(2)(a) omitted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by virtue of Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(2)(b)

F3 S. 56(2)(c) and word inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(2)(c)

F4 Words in s. 56(4) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(3)(a)

F5 Words in s. 56(4) inserted (with effect in accordance with Sch. 4 para. 190 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 4 para. 152(3)(b)

57 Meaning of “contribution to the firm” U.K.

(1) For the purposes of section 56 the company's contribution to the firm is the sum of amounts A and B.

(2) Amount A is the amount which the company has contributed to the firm as capital less so much of that amount (if any) as is within subsection (4).

(3) In particular, the company's share of any profits of the firm is to be included in the amount which the company 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 the company—

(a) has previously drawn out or received back,

(b) is or may be entitled to draw out or receive back at any time when the company is carrying on a trade as a limited partner in the firm, or

(c) is or may be entitled to require another person to reimburse to it.

(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 tax as profits of a trade.

(6) Amount B is the amount of the company'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 company has received that share in money or money's worth.

(7) Profits are within this subsection if they are from the limited partnership trade.

(8) In determining the amount of the company's total share of profits within subsection (7) ignore the company's share of any losses from the limited partnership 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 tax purposes).

(10) If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, subsections (7) and (8) have effect as if references to the limited partnership trade were references to the limited partnership trade or any of the other trades.

58 Meaning of “limited partner” U.K.

(1) In sections 56 and 57 “limited partner” means a company which carries on a trade—

(a) as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907,

(b) as a partner in a firm which in substance acts as a limited partner in relation to the trade (see subsection (2)), or

(c) while the condition mentioned in subsection (3) is met in relation to the company.

(2) A company in substance acts as a limited partner in relation to a trade if the company—

(a) is not entitled to take part in the management of the trade, and

(b) is entitled to have any liabilities (or those beyond a certain limit) for debts or obligations incurred for the purposes of the trade met or reimbursed by some other person.

(3) The condition referred to in subsection (1)(c) is that—

(a) the company carries on the trade jointly with other persons,

(b) under the law of a territory outside the United Kingdom, the company is not entitled to take part in the management of the trade, and

(c) under that law, the company is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade.

(4) In the case of a company which is a limited partner as a result of subsection (1)(c), references in sections 56 and 57 to the firm are to be read as references to the relationship between the company and the other persons mentioned in subsection (3)(a).