Income Tax Act 2007 section 792

Partners claiming excess sideways or capital gains relief

Section 792 deals with the clawback of excess loss relief where a partner's contribution to the firm is subsequently reduced by regulations, causing previously claimed sideways or capital gains relief to exceed their allowable limits.

• Where a partner has claimed sideways relief (against non-trade income) or capital gains relief for post-1 December 2004 trade losses, and sections 104, 107 or 110 apply, a chargeable event can arise if their contribution to the firm is later reduced under section 114 regulations
• A chargeable event occurs whenever such a reduction causes the total trade losses claimed (less any previously reclaimed relief) to exceed the partner's contribution, or increases an existing excess
• Each chargeable event triggers a deemed income receipt (calculated under section 793), treated as non-trade income, effectively clawing back the excess relief
• Where a firm carries on more than one trade, all trades are aggregated for the purpose of determining whether a chargeable event occurs and calculating the deemed income amount