The Partnerships (Restrictions on Contributions to a Trade) Regulations 2005
Sections 117, 118ZB and 118ZE of the Income and Corporation Taxes Act 1988 contain restrictions on the extent to which limited partners, members of a limited liability partnership and non-active partners can set off their share of a partnership’s trading losses against their other income or gains (commonly called “sideways loss relief”). The restrictions are (broadly) that losses are restricted to the individual’s capital contribution to the relevant trade. Section 119 of the Finance At 2004 imposes a charge to income tax where an individual has claimed film related losses in excess of his capital contribution to the trade. Sections 73 and 79 of the Finance Act 2005 supplement these provisions by giving the Commissioners of Inland Revenue a regulatory power to exclude amounts of any description specified in the regulations when computing the individual’s capital contribution to the trade.