CH 19 - Partnership Losses

Question 1

When ITA 2007,s.89 applies
in continuing partners?

Answer 1

When continuing partners in 2023/24 achive a loss generated by /or increased by overlap relief.

Question 2

Define
notional losses
in partnership (how arrises and ceases).

Answer 2

A notional loss arises where the partnership has made an overall profit but, after allocating that profit, a partner has been allocated a loss.

This usually occurs where high salaries have been set.

Question 3

How a national loss is allocated under partnership profits/losses?

Answer 3

The notional loss must be reallocated to the other partners.

This is done based on the ratio of the profits allocated to them so far.

same applies for notional profits

Question 4

Who is non-active partner?

Answer 4

A ‘non-active’ partner
is a partner who does not spend ten hours per week (on average) working in the partnership.

Question 5

What restrictions applies to non-active partner in partnership?

Answer 5

restriction applies to ‘sideways loss relief & capital gains relief

in the first 4 tax years of the trade
to the lower of;
* £25,000 or
* their ‘unrelieved contributions’ to the partnership

(for non-active partners contributions mean means amount of contribution which has not already been used up by previous reliefs claims)

after 5th year the restriciton is to an annual limit of £25k

no restriciton applies to s.83

Question 6

What restrictions applies to ‘limited partner’ in common partnership?

Answer 6

every tax year
sideways loss relief/capital gains relief is restricted;
* lower of £25,000
* or
* their unrelieved contribution to the partnership
*(for limited partners contribution means capital introduced + undrawn profits)