Income Tax Act 2007 section 801

Meaning of "capital contribution"

Section 801 defines how to calculate an individual's "capital contribution" to a trade or firm for the purpose of limiting sideways or capital gains relief on film-related losses.

• Capital contribution is the amount an individual has put into a trade (or into a firm, where the loss arises from a partnership) as capital, reduced by amounts already withdrawn, received back, reimbursed, or which the individual is entitled to withdraw or have reimbursed
• An individual's share of the firm's profits counts towards capital contribution, but only to the extent those profits have been added to the firm's capital, with profits measured under generally accepted accounting practice before any tax adjustments
• Withdrawals or receipts back that are themselves chargeable to income tax as trading profits do not reduce the capital contribution, and references to withdrawing, receiving back or reimbursing include doing so indirectly as well as directly
• Where a chargeable event occurs, any amount treated as consideration received on a relevant disposal is not deducted from capital contribution when applying the separate chargeable event test, and the section must be read alongside any regulations under section 802 that exclude specified amounts from a partner's capital contribution