Corporation Tax Act 2010 section 888

Restrictions on leasing partnership losses

Section 888 restricts how a corporate partner can use losses from a partnership leasing business, where those losses arise from capital allowances on leased plant or machinery.

• Losses arising from capital allowances on leased plant or machinery (the "restricted part") can only be set off against the company's income from plant or machinery leases entered into by the partnership no later than the end of the accounting period in which the loss arose
• The restricted part of the loss cannot be set sideways against the company's total profits, even if the leasing business is treated as a trade
• The restricted part of the loss cannot be surrendered as group relief, whether as a current-period loss or as a carried-forward loss
• When calculating how much of a loss derives from capital allowances, those allowances are treated as the last amounts to be deducted — so the loss is only restricted to the extent it would not have arisen without the capital allowances