Income Tax Act 2007 section 103B

Meaning of "non-active partner" etc.

Section 103B defines what it means to be a "non-active partner" in a trade, including the time commitment test and the consequences of failing to meet that test after relief has been claimed.

• A partner who is not a limited partner and does not spend significant time on the trade in the relevant period is classified as a non-active partner, which restricts the sideways loss relief they can claim
• Significant time means an average of at least 10 hours per week personally engaged in the trade's activities, carried on commercially and with a view to profit
• The relevant period is normally the basis period for the tax year, but where the basis period is shorter than six months, a six-month window applies, running either from when the individual first started the trade or ending when they permanently ceased it
• If relief is granted on the assumption that the individual devoted or would devote significant time to the trade but they in fact failed to do so, the relief is withdrawn by means of an income tax assessment under this section