Income Tax Act 2007 section 116A

Excess loss allocation to partners who are individuals

Section 116A denies loss relief to individual partners where their trade or professional losses arise from, or are connected with, tax avoidance arrangements designed to divert losses away from non-individual entities and towards individuals.

• An individual partner who incurs a trading or professional loss connected with tax avoidance arrangements is denied all relevant loss relief for that loss.
• Tax avoidance arrangements are those where a main purpose is to allocate losses to individuals rather than non-individuals, with a view to the individuals claiming loss relief.
• The non-individual to whom the losses would otherwise have been allocated need not be a partner in the firm, need not be identifiable, and need not even exist.
• Relevant loss relief covers sideways relief, carry-forward trade loss relief, terminal trade loss relief, and capital gains relief.