ANNEX 1:: MINOR CHANGES IN THE LAW MADE BY THE BILL Firm carries on more than one trade
Some consequential changes have been made to cater for the possibility that a firm might carry on more than one trade.
If a firm carries on only one trade, the restriction of sideways or capital gains relief for trade losses by reference to the contribution to the firm means that the individual can get such relief for losses up to the amount at risk, and no more. But if the firm carries on more than one trade, restricting sideways or capital gains relief for trade losses in each trade by reference to the contribution to the firm might result in the individual getting such relief for more than the amount at risk. Clearly the source legislation does not allow this in the case of limited partners and non-active partners (who are not also members of LLPs) as it restricts sideways or capital gains relief for trade losses by reference to the amount of capital contributed to each trade.
So in the case of limited partners and non-active partners (who are not also members of LLPs) the Act restricts the total sideways or capital gains relief available in respect of losses from all trades carried on by the firm to the amount that the individual has at risk.
As noted earlier, for LLPs a member’s contribution is already in terms of the contribution to the LLP. But the source legislation does not explicitly deal with the possibility that an LLP might carry on more than one trade. Therefore to ensure that a consistent policy is applied throughout the sections (ie the relief available is restricted to the amount at risk), the restriction mentioned in the preceding paragraph has been explicitly applied in relation to members of LLPs as well. This is in principle taxpayer-adverse in the case of members of LLPs. See sections 104(7), 105(10), 107(8), 110(7), 111(10), 792(6), 794(6), 800(9) and (10) and 803(4) and Schedule 2 Part 5 (restriction on relief for non-active partners: pre-10 February 2004 events).