Following the decision in the case of Reed v Young 
59TC196, legislation was introduced (which is now at ITA07/S104 and
ICTA88/S118) which imposes restrictions on the amount of relief
against other income available to limited partners in respect of
losses, capital allowances and interest sustained or paid in
connection with a trade carried on by a limited partnership.
The restriction applies to:
No restriction of relief against same trade
The legislation restricts relief against other income from other sources. It does not restrict relief against income derived from the same trade, whether of earlier or later years. Where relief for a trading loss is given against the total income of another chargeable period, which includes both trading income and non-trading income, relief is deemed to be given first against trading income from the same trade.
Reliefs restricted: individuals
In the case of individual limited partners, the reliefs which are subject to restriction are:
These loss reliefs are commonly known as “sideways loss
relief”. Detailed guidance on how to compute sideways loss
relief restrictions for individual limited partners is at
For losses sustained on or after 2 March 2007 there is an annual limit of £25,000 on the amount of losses for a tax year for which sideways loss relief can be given to a limited partner, see BIM72611.
Reliefs restricted: companies
In the case of a corporate limited partner the reliefs, which are subject to restriction, are:
Calculation of limit of relief: corporate partners
In the case of a corporate limited partner, a comparison has to be made, at the end of the company's own accounting period, between:
Relief against other income must never exceed the relevant sum.
The ‘aggregate amount’ is the total, as at the end of
the company’s accounting period, of all relief allowed
against other income under any of the reliefs listed above.
The ‘relevant sum’ is the total at the end of the company's own accounting period of:
‘Trading profits’ is to be taken as meaning trading
profits as computed in the accounts, not as adjusted for tax
Giving guarantees in respect of money borrowed by the partnership does not count as the contribution of capital. You should ensure that borrowed finance is not presented as partners' capital.
For corporate partners these tests should be applied at the end
of the company's own accounting period.
Where these dates coincide with the accounting date of the partnership, the partnership balance sheet can be used to compute the ‘relevant sum’ but in other cases a separate computation must be called for in support of any claim to relief. However, a balance sheet at say 31 March, may be taken as proxy for a computation as at 5 April.
Corporate limited partner
|1 May 2000||Limited Partnership formed. Company A (limited partner) contributes £1,000 as capital|
|30 April 2001||Partnership accounts prepared showing|
|Loss per accounts||£10,000|
|Total loss =||£18,000|
|Allocated to Company A||£6,000|
|Company A claims to surrender loss as group relief:||
|‘Relevant sum’ at 30/4/2001||£1,000|
|‘Aggregate amount’ at 30/4/2001||Nil|
|Sum available for group relief||£1,000|
|Balance £5,000 carried forward under ICTA88/S393 (1)||
|1 May 2001||Company A contributes a further £4,000 as capital|
|30 April 2002||Partnership accounts prepared showing||
|Loss per accounts||£12,000|
|Total loss =||£16,000|
|Allocated to Company A||£7,000|
|Company A claims to surrender loss as group relief||
|‘Relevant sum’ at 30/4/2002||
|(£1,000 + £4,000) =||£5,000|
|‘Aggregate amount’ at 30/4/2002||£1,000|
|Sum available for group relief||£4,000|
|Balance £8,000 (£5,000 + £7000 – £4,000) carried forward under ICTA88/S393 (1)|