Income Tax Act 2007 section 107

Restriction on reliefs for members of LLPs

Section 107 limits the amount of sideways loss relief and capital gains relief that an individual member of a Limited Liability Partnership (LLP) can claim for trade losses, by reference to their financial contribution to the LLP.

• Where an individual carries on a trade as a member of an LLP and makes a loss in that trade during a tax year, the amount of sideways relief (against other income) and capital gains relief is capped at the individual's contribution to the LLP at the end of the basis period for that tax year.
• The cap works by requiring that the total of the current relief claim plus all previous relevant relief claims, minus any amounts of relief previously recovered under the excess relief rules, must not exceed the individual's contribution to the LLP.
• If the individual was a non-active partner during the early tax years of trading, this section does not apply and the separate restriction in section 110 applies instead.
• Where the LLP carries on more than one trade, the calculation of cumulative relevant relief and recovered relief takes into account all trades carried on by the LLP, not just the trade in which the current loss arose.