Partnerships - loss relief restrictions: limited partners: example
On 6 April 2011 X joins an existing partnership as a limited partner.
X introduces the following capital into the partnership:
6 April 2011: £90,000.
6 April 2012: £25,000.
Share of partnership profits and losses
X’s share of the partnership’s trading profits and losses are:
Year ended 5 April 2012: Loss (£140,000).
Year ended 5 April 2013: Profit £60,000.
X takes no drawings from the partnership.
X’s capital contributions for the purposes of loss relief restrictions are:
At 5 April 2012: £90,000.
At 5 April 2013: £175,000 (£90,000 + £25,000 + £60,000 undrawn profits).
Loss relief claims
The relief that may be given against other income for the loss of £140,000 for the year ended 5 April 2012 is restricted. First, the relief is restricted to the amount of X’s capital contribution at 5 April 2012 (£90,000)), and then the £25,000 annual limit is applied. The relief against X’s other income or gains is therefore £25,000.
Losses carried forward
The remaining £115,000 of the £140,000 loss can be carried forward and set against X’s share of the partnership’s trading profits for 2013/14 and later years.