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 “non-active partner” and “early tax year” etc
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1
For the purposes of this Chapter an individual carries on a trade as a non-active partner during a tax year if the individual—
a
carries on the trade as a partner in a firm at a time during the year,
b
does not carry on the trade as a limited partner at any time during the year, and
c
does not devote a significant amount of time to the trade in the relevant period for the year.
2
For the purposes of this Chapter an individual devotes a significant amount of time to a trade in the relevant period for a tax year if, in that period, the individual spends an average of at least 10 hours a week personally engaged in activities carried on for the purposes of the trade.
3
For this purpose “the relevant period” means the basis period for the tax year (unless the basis period is shorter than 6 months).
4
If the basis period for the tax year is shorter than 6 months, “the relevant period” means—
a
the period of 6 months beginning with the date on which the individual first started to carry on the trade (if the basis period begins with that date), or
b
the period of 6 months ending with the date on which the individual permanently ceased to carry on the trade (if the basis period ends with that date).
5
If—
a
any relief is given on the assumption that the individual devoted or will devote a significant amount of time to the trade in the relevant period for a tax year, but
b
the individual in fact failed or fails to do so,
the relief is withdrawn by the making of an assessment to income tax under this section.
6
In this Chapter “early tax year” means, in relation to an individual carrying on a trade—
a
the tax year in which the individual first started to carry on the trade, or
b
one of the next 3 tax years.