Part 4

Loss relief
Chapter 3

Restrictions on trade loss relief for certain partners

Non-active members of LLPs or other partnerships (apart from limited partnerships)

Meaning of “contribution to the firm”
111
1
For the purposes of section 110 the individual's contribution to the firm at any time (“the relevant time”) is the sum of amount A and amount B and, if there is a winding up of the firm, amount C.
2
Amount A is the amount which the individual has contributed to the firm as capital less so much of that amount (if any) as is within subsection (4).
3
In particular, the individual's share of any profits of the firm is to be included in the amount which the individual 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—
a
the individual has previously drawn out or received back,
b
the individual draws out or receives back during the period of 5 years beginning with the relevant time,
c
the individual is or may be entitled to draw out or receive back at any time when the individual is carrying on a trade as a partner in the firm, or
d
the individual is or may be entitled to require another person to reimburse to the individual.
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 income tax as profits of a trade.
6
Amount B is the amount of the individual'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 individual has received that share in money or money's worth.
7
Profits are within this subsection if they are from the relevant trade.
8
In determining the amount of the individual's total share of profits within subsection (7) ignore the individual's share of any losses from the relevant 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 income tax purposes).
10
If the firm is carrying on, or has carried on, other trades apart from the relevant trade, subsections (7) and (8) have effect as if references to the relevant trade were references to the relevant trade or any of the other trades.
Subsection (8) of section 110 applies for the purposes of this subsection as it applies for the purposes of that section.
11
Amount C is the amount which the individual has contributed to the assets of the firm on its winding up so far as it is not included in amount A or B.
12
This section needs to be read with section 113A and any regulations made under section 114 (exclusion of amounts in calculating the individual's contribution to the firm for the purposes of section 110).
Words in s. 111(12) substituted (retrospective to 6.4.2007) by Finance Act 2007 (c. 11), Sch. 4 paras. 11(c), 21