Corporation Tax Act 2009 section 1264

Loss-making period in which some partners have profits

Section 1264 deals with how a corporate partner's share of a partnership loss is adjusted when the firm overall makes a loss but some partners still show a profit (typically due to entitlements such as salaries or interest on capital).

• Where the firm makes an overall loss but a corporate partner's allocated share is a profit, that partner's share of the trade loss is treated as neither a profit nor a loss
• Where the corporate partner has a loss and at least one other partner has a profit, the corporate partner's allowable loss is restricted using a formula so that total partner losses do not exceed the firm's overall loss
• The formula multiplies the firm's loss by the ratio of the corporate partner's own loss to the total losses of all loss-making partners
• The "comparable amount" for each other partner is found by notionally dividing the firm's loss among all other partners according to the profit-sharing arrangements, regardless of whether those partners are subject to corporation tax or income tax