Income Tax Act 2007 section 112

Meaning of "early tax year"

Section 112 defines the term "early tax year" in the context of an individual carrying on a trade, and forms part of the rules governing sideways loss relief restrictions for non-active partners.

• An "early tax year" is either the tax year in which the individual first started carrying on the trade, or one of the next three tax years after that
• This definition is relevant to determining whether a partner qualifies as a "non-active partner" during the early years of a trade
• A non-active partner is broadly an individual who does not devote a significant amount of time (at least ten hours per week on average) to the trade and is essentially a financial investor
• Only general partners or members of LLPs can be non-active partners — limited partners are excluded from this definition and dealt with under separate rules