Commentary on Sections Overview Overview
331.This Chapter sets out restrictions on trade loss relief that apply in certain cases where an individual carries on a trade as a member of a partnership. The restrictions do not apply to persons other than individuals, or in relation to professions.
332.The main restrictions are on deducting trading losses from income (other than income from the trade) or capital gains. Broadly, the amount of such deductions must not exceed the amount that the individual stands to lose commercially.
333.In various places, source legislation expresses the amount that a partner stands to lose commercially by reference to the partner’s contribution to the trade that a partnership carries on (the “contribution to the trade”). But, in such cases, the amount that a partner stands to lose commercially is more likely to be reflected in the partner’s contribution to the partnership that carries on the trade.
334.So this Chapter, and Chapter 5 of Part 13 (avoidance involving trading losses), makes a change by expressing the amount that a partner stands to lose commercially in terms of the partner’s contribution to the partnership (the “contribution to the firm”). The change to contribution to the firm requires that the possibility of there being partnerships with more than one trade is addressed by the change. And for consistency with other partnerships, the possibility of a limited liability partnership carrying on more than one trade is also addressed. This change affects many sections in this Chapter and it also makes a number of other clarifications as to what is included in a partner’s contribution. See Change 16 in Annex 1.