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HMRC internal manual

Partnership Manual

Limited partnerships and limited liability partnerships: restrictions on loss relief for LLP members

The sideways loss relief restrictions applying to limited partners of LPs (see PM50200) are largely mirrored for members of LLPs, with some differences. The legislation is at ITA2007/S107 and CTA2010/S59. The differences are as follows:

  1. The ‘£25,000 cap’ at ITA2007/S103C will apply to members of an LLP (or general partnership) only if they are “non-active” members, broadly spending less than 10 hours per week personally engaged in the partnership’s activities.
  2. Sideways loss relief also encompasses “interest relief” available under ITA2007/S398 for individuals incurring interest on loans to invest in partnerships (which is not available to limited partners of an LP).
  3. Determining what amount a member has contributed as capital to the trade of an LLP may be more difficult to determine, in contrast with other types of partnership, due to the legal status as a body corporate. Under general law, undrawn profits of the LLP are regarded as debts of the LLP unless the partnership agreement specifically states otherwise.

Apart from the considerations noted above, the summary in this manual at PM50200 is generally applicable (although references to the relevant legislation are as above). Detailed guidance, however, can be found at BIM82135.