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)|
(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.