Annex 1: Minor changes in the law Change 8: Trading losses: restrictions: contribution to the firm in place of contribution to the trade: sections 56, 57, 58, 59, and 60 Contributions to a firm — trading profits not drawn
The Act also provides that a company’s share of trading profits, taken into account in determining the company’s contribution to the firm, is calculated by looking at periods where such profits were made, and ignoring trading losses in other periods. The source legislation did not contain an equivalent provision. The effect is broadly to determine a company’s share of undrawn trading profits as the amount that the company would have received if such profits had been distributed fully on a period by period basis. See section 57(8).
This change is adverse in principle and in practice to some taxpayers and favourable to others. But the numbers affected and the amounts involved are likely to be small.