Income Tax Act 2007

Income Tax Act 2007

2007 CHAPTER 3

Commentary on Sections

Part 4: Loss relief

Overview

Chapter 3: Restrictions on trade loss relief for certain partners

Overview

Section 104: Restriction on reliefs for limited partners

341. This section restricts the use of a trade loss made in a tax year by an individual carrying on the trade as a limited partner. It is based on section 117(1) and (2) of ICTA.

342. Sideways relief or capital gains relief for the trade loss, combined with other relevant relief, must not exceed the individual’s contribution to the firm.

343. The interaction between section 72 of FA 1991 and section 117 of ICTA is made explicit. See Change 13 in Annex 1.

344. The individual’s contribution to the firm is measured at the end of the basis period for the relevant tax year, rather than at the end of the tax year as in the source legislation. See Change 15 in Annex 1.

345. There is a change from “contribution to the trade” in the source legislation to “contribution to the firm”. See the overview commentary on this Chapter and Change 16 in Annex 1.