Corporation Tax Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 4 — Loss relief
Chapter 3 — Limited partners and members of limited liability partnerships
32

54
Non-UK resident company: receipts of interest, dividends or royalties
(1)
This section applies if—
(a)
a non-UK resident company carries on a trade in the United Kingdom,
and
(b)
tax-exempt receipts of interest, dividends or royalties arise to the
5
company.
(2)
The receipts are not to be excluded from the profits of the trade so as to give
rise to a loss to be deducted under any of these provisions—
(a)
section 37,
(b)
section 45, or
10
(c)
section 436A of ICTA.
(3)
For the purposes of subsection (1) a receipt is “tax-exempt” if it has been treated
as tax-exempt under arrangements having effect under section 2 of TIOPA
2010.
Chapter 3
15
Limited partners and members of limited liability partnerships
Introduction
55
Introduction to Chapter
(1)
This Chapter restricts the amount of relief that may be given for any loss made
by a company in a trade carried on by the company—
20
(a)
as a limited partner (see sections 56 to 58), or
(b)
as a member of a limited liability partnership (an “LLP”) (see sections
59 to 61).
(2)
In this Chapter persons carrying on a trade in partnership are referred to
collectively as a “firm”.
25
Limited partners
56
Restriction on reliefs for limited partners
(1)
This section applies if—
(a)
at any time in an accounting period a company carries on a trade (“the
limited partnership trade”) as a limited partner in a firm, and
30
(b)
the company makes a loss in the limited partnership trade in that
period (“the loss-making period”).
(2)
There is a restriction on the amount of relief that may be given for the loss—
(a)
under section 37 (relief for trade losses against total profits) other than
against profits of the limited partnership trade, or
35
(b)
under Part 5 (group relief).
(3)
The restriction is that the sum of—
(a)
the amount of the relief given, and
(b)
the total amount of all other relief within subsection (4),

Corporation Tax Bill
Part 4 — Loss relief
Chapter 3 — Limited partners and members of limited liability partnerships
33


must not exceed the company’s contribution to the firm as at the time
mentioned in subsection (5).
(4)
Relief is within this subsection if it is given under section 37 or Part 5 for a loss
made in the limited partnership trade by the company in an accounting period
at any time during which it carries on that trade as a limited partner.
5
(5)
The time referred to in subsection (3) is—
(a)
the end of the loss-making period, or
(b)
if the company ceases to carry on the limited partnership trade during
that period, the time when it does so.
(6)
If the firm is carrying on, or has carried on, other trades apart from the limited
10
partnership trade, for the purpose of determining the total amount of all other
relief within subsection (4), apply that subsection in relation to each other trade
as well as the limited partnership trade and then add the results together.
57
Meaning of “contribution to the firm”
(1)
For the purposes of section 56 the company’s contribution to the firm is the
15
sum of amounts A and B.
(2)
Amount A is the amount which the company has contributed to the firm as
capital less so much of that amount (if any) as is within subsection (4).
(3)
In particular, the company’s share of any profits of the firm is to be included in
the amount which the company has contributed to the firm as capital so far as
20
that share has been added to the firm’s capital.
(4)
An amount of capital is within this subsection if it is an amount which the
company—
(a)
has previously drawn out or received back,
(b)
is or may be entitled to draw out or receive back at any time when the
25
company is carrying on a trade as a limited partner in the firm, or
(c)
is or may be entitled to require another person to reimburse to it.
(5)
In subsection (4) any reference to drawing out or receiving back an amount is
to doing so directly or indirectly but does not include drawing out or receiving
back an amount which, because of its being drawn out or received back, is
30
chargeable to tax as profits of a trade.
(6)
Amount B is the amount of the company’s total share of profits within
subsection (7) except so far as—
(a)
that share has been added to the firm’s capital, or
(b)
the company has received that share in money or money’s worth.
35
(7)
Profits are within this subsection if they are from the limited partnership trade.
(8)
In determining the amount of the company’s total share of profits within
subsection (7) ignore the company’s share of any losses from the limited
partnership trade which would (apart from this subsection) reduce that
amount.
40
(9)
In subsections (3), (7) and (8) any reference to profits or losses are to profits or
losses calculated in accordance with generally accepted accounting practice
(before any adjustment required or authorised by law in calculating profits or
losses for tax purposes).

Corporation Tax Bill
Part 4 — Loss relief
Chapter 3 — Limited partners and members of limited liability partnerships
34

(10)
If the firm is carrying on, or has carried on, other trades apart from the limited
partnership trade, subsections (7) and (8) have effect as if references to the
limited partnership trade were references to the limited partnership trade or
any of the other trades.
58
Meaning of “limited partner”
5
(1)
In sections 56 and 57 “limited partner” means a company which carries on a
trade—
(a)
as a limited partner in a limited partnership registered under the
Limited Partnerships Act 1907,
(b)
as a partner in a firm which in substance acts as a limited partner in
10
relation to the trade (see subsection (2)), or
(c)
while the condition mentioned in subsection (3) is met in relation to the
company.
(2)
A company in substance acts as a limited partner in relation to a trade if the
company—
15
(a)
is not entitled to take part in the management of the trade, and
(b)
is entitled to have any liabilities (or those beyond a certain limit) for
debts or obligations incurred for the purposes of the trade met or
reimbursed by some other person.
(3)
The condition referred to in subsection (1)(c) is that—
20
(a)
the company carries on the trade jointly with other persons,
(b)
under the law of a territory outside the United Kingdom, the company
is not entitled to take part in the management of the trade, and
(c)
under that law, the company is not liable beyond a certain limit for
debts or obligations incurred for the purposes of the trade.
25
(4)
In the case of a company which is a limited partner as a result of subsection
(1)(c), references in sections 56 and 57 to the firm are to be read as references to
the relationship between the company and the other persons mentioned in
subsection (3)(a).
Members of LLPs
30
59
Restriction on relief for members of LLPs
(1)
This section applies if—
(a)
a company carries on a trade (“the LLP trade”) as a member of an LLP
at any time in an accounting period, and
(b)
the company makes a loss in the LLP trade in that period (“the loss-
35
making period”).
(2)
There is a restriction on the amount of relief that may be given for the loss—
(a)
under section 37 (relief for trade losses against total profits) other than
against profits of the LLP trade, or
(b)
under Part 5 (group relief).
40
(3)
The restriction is that the sum of—
(a)
the amount of the relief given, and
(b)
the total amount of all other relief within subsection (4),

Corporation Tax Bill
Part 4 — Loss relief
Chapter 3 — Limited partners and members of limited liability partnerships
35


must not exceed the company’s contribution to the LLP as at the time
mentioned in subsection (5).
(4)
Relief is within this subsection if it is given under section 37 or Part 5 for a loss
made in the LLP trade by the company in an accounting period at any time
during which it carries on that trade as a member of an LLP.
5
(5)
The time mentioned in subsection (3) is—
(a)
the end of the loss-making period, or
(b)
if the company ceases to carry on the LLP trade during that period, at
the time when it does so.
(6)
If the LLP is carrying on, or has carried on, other trades apart from the LLP
10
trade, for the purpose of determining the total amount of all other relief within
subsection (4), apply that subsection in relation to each other trade as well as
the LLP trade and then add the results together.
60
Meaning of “contribution to the LLP”
(1)
For the purposes of section 59 the company’s contribution to the LLP at any
15
time (“the relevant time”) is the sum of amounts A and B.
(2)
Amount A is the amount which the company has contributed to the LLP as
capital less so much of that amount (if any) as is within subsection (5).
(3)
In particular, the company’s share of any profits of the LLP is to be included in
the amount which the company has contributed to the LLP as capital so far as
20
that share has been added to the LLP’s capital.
(4)
In subsection (3) the reference to profits is to profits calculated in accordance
with generally accepted accounting practice (before any adjustment required
or authorised by law in calculating profits for tax purposes).
(5)
An amount of capital is within this subsection if it is an amount which the
25
company—
(a)
has previously drawn out or received back,
(b)
draws out or receives back during the period of 5 years beginning with
the relevant time,
(c)
is or may be entitled to draw out or receive back at any time when it is
30
a member of the LLP, or
(d)
is or may be entitled to require another person to reimburse to it.
(6)
In subsection (5) any reference to drawing out or receiving back an amount is
to doing so directly or indirectly but does not include drawing out or receiving
back an amount which, because of its being drawn out or received back, is
35
chargeable to tax as profits of a trade.
(7)
Amount B is the amount of the company’s liability on a winding up of the LLP
so far as that amount is not included in amount A.
(8)
For the purposes of subsection (7) the amount of the company’s liability on a
winding up of the LLP is the amount which—
40
(a)
the company is liable to contribute to the assets of the LLP in the event
of the LLP being wound up, and
(b)
the company remains liable to contribute for the period of at least 5
years beginning with the relevant time (or until the LLP is wound up,
if that happens before the end of that period).
45