Income Tax Act 2007 section 105

Meaning of "contribution to the firm"

Section 105 defines how to calculate a limited partner's "contribution to the firm" for the purposes of restricting trade loss relief under section 104.

• The contribution to the firm is the sum of two amounts: Amount A (net capital contributed) and Amount B (undrawn share of trading profits).
• Amount A is capital put into the firm, reduced by amounts already withdrawn, amounts the partner is entitled to withdraw while still a limited partner, and amounts another person may be required to reimburse — but not reduced by withdrawals that are themselves chargeable to income tax as trading profits.
• Amount B is the individual's total share of profits from the firm's trade(s), excluding any share already added to the firm's capital or already received in money or money's worth, and ignoring any losses that would otherwise reduce the figure.
• Profits and losses for this purpose are calculated using generally accepted accounting practice, before any statutory tax adjustments, and where the firm carries on more than one trade, all of those trades are taken into account.