Corporation Tax Act 2010

Chapter 3U.K.Limited partners and members of limited liability partnerships

IntroductionU.K.

55Introduction to ChapterU.K.

(1)This Chapter restricts the amount of relief that may be given for any loss made by a company in a trade carried on by the company—

(a)as a limited partner (see sections 56 to 58), or

(b)as a member of a limited liability partnership (an “LLP”) (see sections 59 to 61).

(2)In this Chapter persons carrying on a trade in partnership are referred to collectively as a “firm”.

Limited partnersU.K.

56Restriction on reliefs for limited partnersU.K.

(1)This section applies if—

(a)at any time in an accounting period a company carries on a trade (“the limited partnership trade”) as a limited partner in a firm, and

(b)the company makes a loss in the limited partnership trade in that period (“the loss-making period”).

(2)There is a restriction on the amount of relief that may be given for the loss—

(a)under section 37 (relief for trade losses against total profits) other than against profits of the limited partnership trade, or

(b)under Part 5 (group relief).

(3)The restriction is that the sum of—

(a)the amount of the relief given, and

(b)the total amount of all other relief within subsection (4),

must not exceed the company's contribution to the firm as at the time mentioned in subsection (5).

(4)Relief is within this subsection if it is given under section 37 or Part 5 for a loss made in the limited partnership trade by the company in an accounting period at any time during which it carries on that trade as a limited partner.

(5)The time referred to in subsection (3) is—

(a)the end of the loss-making period, or

(b)if the company ceases to carry on the limited partnership trade during that period, the time when it does so.

(6)If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the limited partnership trade and then add the results together.

57Meaning of “contribution to the firm”U.K.

(1)For the purposes of section 56 the company's contribution to the firm is the sum of amounts A and B.

(2)Amount A is the amount which the company has contributed to the firm as capital less so much of that amount (if any) as is within subsection (4).

(3)In particular, the company's share of any profits of the firm is to be included in the amount which the company 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 the company—

(a)has previously drawn out or received back,

(b)is or may be entitled to draw out or receive back at any time when the company is carrying on a trade as a limited partner in the firm, or

(c)is or may be entitled to require another person to reimburse to it.

(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 tax as profits of a trade.

(6)Amount B is the amount of the company'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 company has received that share in money or money's worth.

(7)Profits are within this subsection if they are from the limited partnership trade.

(8)In determining the amount of the company's total share of profits within subsection (7) ignore the company's share of any losses from the limited partnership 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 tax purposes).

(10)If the firm is carrying on, or has carried on, other trades apart from the limited partnership trade, subsections (7) and (8) have effect as if references to the limited partnership trade were references to the limited partnership trade or any of the other trades.

58Meaning of “limited partner”U.K.

(1)In sections 56 and 57 “limited partner” means a company which carries on a trade—

(a)as a limited partner in a limited partnership registered under the Limited Partnerships Act 1907,

(b)as a partner in a firm which in substance acts as a limited partner in relation to the trade (see subsection (2)), or

(c)while the condition mentioned in subsection (3) is met in relation to the company.

(2)A company in substance acts as a limited partner in relation to a trade if the company—

(a)is not entitled to take part in the management of the trade, and

(b)is entitled to have any liabilities (or those beyond a certain limit) for debts or obligations incurred for the purposes of the trade met or reimbursed by some other person.

(3)The condition referred to in subsection (1)(c) is that—

(a)the company carries on the trade jointly with other persons,

(b)under the law of a territory outside the United Kingdom, the company is not entitled to take part in the management of the trade, and

(c)under that law, the company is not liable beyond a certain limit for debts or obligations incurred for the purposes of the trade.

(4)In the case of a company which is a limited partner as a result of subsection (1)(c), references in sections 56 and 57 to the firm are to be read as references to the relationship between the company and the other persons mentioned in subsection (3)(a).

Members of LLPsU.K.

59Restriction on relief for members of LLPsU.K.

(1)This section applies if—

(a)a company carries on a trade (“the LLP trade”) as a member of an LLP at any time in an accounting period, and

(b)the company makes a loss in the LLP trade in that period (“the loss-making period”).

(2)There is a restriction on the amount of relief that may be given for the loss—

(a)under section 37 (relief for trade losses against total profits) other than against profits of the LLP trade, or

(b)under Part 5 (group relief).

(3)The restriction is that the sum of—

(a)the amount of the relief given, and

(b)the total amount of all other relief within subsection (4),

must not exceed the company's contribution to the LLP as at the time mentioned in subsection (5).

(4)Relief is within this subsection if it is given under section 37 or Part 5 for a loss made in the LLP trade by the company in an accounting period at any time during which it carries on that trade as a member of an LLP.

(5)The time mentioned in subsection (3) is—

(a)the end of the loss-making period, or

(b)if the company ceases to carry on the LLP trade during that period, at the time when it does so.

(6)If the LLP is carrying on, or has carried on, other trades apart from the LLP trade, for the purpose of determining the total amount of all other relief within subsection (4), apply that subsection in relation to each other trade as well as the LLP trade and then add the results together.

60Meaning of “contribution to the LLP”U.K.

(1)For the purposes of section 59 the company's contribution to the LLP at any time (“the relevant time”) is the sum of amounts A and B.

(2)Amount A is the amount which the company has contributed to the LLP as capital less so much of that amount (if any) as is within subsection (5).

(3)In particular, the company's share of any profits of the LLP is to be included in the amount which the company has contributed to the LLP as capital so far as that share has been added to the LLP's capital.

(4)In subsection (3) the reference to profits is to profits calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits for tax purposes).

(5)An amount of capital is within this subsection if it is an amount which the company—

(a)has previously drawn out or received back,

(b)draws out or receives back during the period of 5 years beginning with the relevant time,

(c)is or may be entitled to draw out or receive back at any time when it is a member of the LLP, or

(d)is or may be entitled to require another person to reimburse to it.

(6)In subsection (5) 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 tax as profits of a trade.

(7)Amount B is the amount of the company's liability on a winding up of the LLP so far as that amount is not included in amount A.

(8)For the purposes of subsection (7) the amount of the company's liability on a winding up of the LLP is the amount which—

(a)the company is liable to contribute to the assets of the LLP in the event of the LLP being wound up, and

(b)the company remains liable to contribute for the period of at least 5 years beginning with the relevant time (or until the LLP is wound up, if that happens before the end of that period).

61Unrelieved losses brought forwardU.K.

(1)This section applies if—

(a)a company (“the member company”) carries on a trade as a member of an LLP at a time during an accounting period (“the current period”), and

(b)as a result of section 59, relief under section 37 or Part 5 (group relief) has not been given for an amount of loss made in the trade by the member company as a member of the LLP in a previous accounting period.

(2)For the purpose of determining the relief under section 37 or Part 5 to be given to any company, the amount of loss is treated as having been made by the member company in the current period so far as it is not excluded by subsection (3) or (4).

(3)An amount of loss is excluded so far as—

(a)under this section the amount has been treated as made by the member company in a previous accounting period, and

(b)as a result of that, relief under section 37 or Part 5 has been given for the amount or would have been given had a claim been made.

(4)An amount of loss is also excluded so far as relief under the Corporation Tax Acts has been given for the amount other than as a result of this section.