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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Partnerships - loss relief restrictions: limited partners: example

On 6 April 2011 X joins an existing partnership as a limited partner.

Capital introduced

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.

Capital contributions

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.