Income Tax Act 2007 section 110

Restriction on reliefs for non-active partners in early tax years

Section 110 limits the amount of sideways relief and capital gains relief that a non-active partner can claim for trade losses made during the early years of a partnership trade.

• A non-active partner who makes a trade loss in an early tax year faces a cap on the sideways relief and capital gains relief available for that loss.
• The cap is set by the individual's contribution to the firm at the end of the basis period for the relevant tax year, after taking into account all other relevant relief previously given and any amounts of recovered relief.
• Relevant relief includes sideways or capital gains relief for losses from the same trade made while the individual was a limited partner, an LLP member, or a non-active partner in an early tax year.
• The restriction does not apply to losses from Lloyd's underwriting, which is subject to its own specific tax regime.