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 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 trade loss relief against total profit or group relief by reference to the contribution to the firm means that the company 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 total profit or group relief for trade losses in each trade by reference to the contribution to the firm might result in the company getting such relief for more than the amount at risk. Clearly the source legislation does not allow this in the case of limited partners (who are not also members of LLPs) as it restricts relief for trade losses against total profits by reference to the amount of capital contributed to each trade.
So in the case of limited partners (who are not also members of LLPs) the Act restricts the total profit relief available in respect of losses from all trades carried on by the firm to the amount that the company 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. Accordingly, to ensure that a consistent policy is applied throughout the sections (that is, 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.