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HMRC internal manual

Partnership Manual

Limited partnerships and limited liability partnerships: limited partnerships - restrictions on loss relief for limited partners

There are restrictions on the amount of trade loss relief available to limited partners to set against their other income and gains (“sideways loss relief”).

Broadly, ITA2007/S104 (for individuals) and CTA2010/S56 (for companies) restrict sideways loss relief available to set against income and gains from other sources to the amount of capital contributed to the Limited Partnership. Additionally, for individuals, ITA2007/S103C further restricts the relief available to £25,000 per tax year. Please note that these rules only apply to LPs carrying on a trade (not a profession, vocation or investment business). See BIM82105 for further detailed guidance.

Further restrictions may also apply. From 21 October 2009 ITA2007/S74ZA prevents any sideways loss relief being available for “tax-generated losses”. This provision applies to any individual carrying on a trade, profession or vocation, alone or in partnership. Guidance is at BIM85762

ITA 2007/S24A introduced a more general cap on income tax relief which applies from the tax year 2013/14. Sideways loss relief is within the scope of the cap, which restricts the total income tax relief available to an individual from reliefs within the scope of the cap to the greater of:

£50,000, or

25% of the individual’s adjusted total income.