BIM72645 - Computing the amount to assess: Partnerships - loss relief restrictions: Non-active partners - example
On 1 April 2004 Z becomes a partner in a general partnership on a non-active basis, introducing capital of £10,000.
Z’s share of the partnership profits and losses is:
| Year ended 31 March 2005 | Loss (£15,000) |
| Year ended 31 March 2006 | Loss (£10,000) |
| Year ended 31 March 2007 | Profit £10,000 |
| Year ended 31 March 2008 | Profit £20,000 |
| Year ended 31 March 2009 | Loss (£75,000) |
Z is entitled to sideways relief for losses as follows:
| 2004/2005 | £10,000 (a) | (unrelieved loss £5,000) |
| 2005/2006 | Nil (b) | (unrelieved loss £10,000 + £5,000 = £15,000) |
| 2006/2007 | N/A | (£10,000 of unrelieved losses brought forward set against trading profits under ITA07/S83) |
| 2007/2008 | N/A | (£5,000 of unrelieved losses brought forward set against trading profits under ITA07/S83) |
| 2008/2009 | £25,000 (c) |
(a) Sideways loss relief restricted to capital contribution at 31 March 2005 (£10,000). The balance of the loss of £5,000 (£15,000 - £10,000) is carried forward.
(b) No sideways loss relief of £5,000 is available as capital contribution at 31 March 2006 (£10,000) does not exceed total sideways relief given for earlier years.
(c) No restriction on sideways loss relief by reference to capital contributions as 2008/09 is not an early year of trading, but £25,000 annual limit applies. The £50,000 balance of the loss can only be carried forward to set against profits of the same trade for later years under ITA07/S83. Losses restricted by the annual limit are not “unrelieved losses” available for sideways loss relief in later years, see BIM72650.
