Income Tax Act 2007 section 127C

Excess loss allocation to partners who are individuals

Section 127C denies property business loss relief to individual partners where the losses arise from tax avoidance arrangements designed to redirect losses away from non-individual entities towards individuals.

• Where an individual partner makes a loss in a UK or overseas property business, that loss cannot be relieved if it arises from, or is connected with, relevant tax avoidance arrangements
• Tax avoidance arrangements are those where a main purpose is to ensure property business losses are allocated to an individual rather than a non-individual (such as a company), with a view to the individual obtaining loss relief
• It does not matter whether the non-individual entity is a partner in the firm, is unknown, or does not even exist — the denial of relief still applies
• The loss relief denied covers both carry-forward property loss relief under section 118 and property loss relief against general income under section 120