Corporation Tax Act 2010

Members of LLPs U.K.

59 Restriction on relief for members of LLPs U.K.

(1) This section applies if—

(a) a company carries on a trade (“the LLP trade”) as a member of an LLP at any time in an accounting period, and

(b) the company makes a loss in the LLP 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 (relief for trade losses against total profits) other than against profits of the LLP trade, or

(b) under Part 5 (group relief).

(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 LLP as at the time mentioned in subsection (5).

(4) Relief is within this subsection if it is given under section 37 or Part 5 for a loss made in the LLP trade by the company in an accounting period at any time during which it carries on that trade as a member of an LLP.

(5) The time mentioned in subsection (3) is—

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

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

(6) If the LLP is carrying on, or has carried on, other trades apart from the LLP 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 LLP trade and then add the results together.

60 Meaning of “contribution to the LLP” U.K.

(1) For the purposes of section 59 the company's contribution to the LLP at any time (“the relevant time”) is the sum of amounts A and B.

(2) Amount A is the amount which the company has contributed to the LLP as capital less so much of that amount (if any) as is within subsection (5).

(3) In particular, the company's share of any profits of the LLP is to be included in the amount which the company has contributed to the LLP as capital so far as that share has been added to the LLP's capital.

(4) In subsection (3) the reference to profits is to profits calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits for tax purposes).

(5) 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) draws out or receives back during the period of 5 years beginning with the relevant time,

(c) is or may be entitled to draw out or receive back at any time when it is a member of the LLP, or

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

(6) In subsection (5) 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.

(7) Amount B is the amount of the company's liability on a winding up of the LLP so far as that amount is not included in amount A.

(8) For the purposes of subsection (7) the amount of the company's liability on a winding up of the LLP is the amount which—

(a) the company is liable to contribute to the assets of the LLP in the event of the LLP being wound up, and

(b) the company remains liable to contribute for the period of at least 5 years beginning with the relevant time (or until the LLP is wound up, if that happens before the end of that period).

61 Unrelieved losses brought forward U.K.

(1) This section applies if—

(a) a company (“the member company”) carries on a trade as a member of an LLP at a time during an accounting period (“the current period”), and

(b) as a result of section 59, relief under section 37 or Part 5 (group relief) has not been given for an amount of loss made in the trade by the member company as a member of the LLP in a previous accounting period.

(2) For the purpose of determining the relief under section 37 or Part 5 to be given to any company, the amount of loss is treated as having been made by the member company in the current period so far as it is not excluded by subsection (3) or (4).

(3) An amount of loss is excluded so far as—

(a) under this section the amount has been treated as made by the member company in a previous accounting period, and

(b) as a result of that, relief under section 37 or Part 5 has been given for the amount or would have been given had a claim been made.

(4) An amount of loss is also excluded so far as relief under the Corporation Tax Acts has been given for the amount other than as a result of this section.