Commentary

B7.520 Relief for partnership trading losses

Business tax
Business tax | Commentary

B7.520 Relief for partnership trading losses

Business tax | Commentary

Partnership losses

B7.520 Relief for partnership trading losses

Loss relief—individual and corporate partners

For both partners liable to income tax and partners liable to corporate tax, a trading loss incurred by a partnership is calculated in the same way as a profit. It is also allocated to partners in the same way as profits1.

In other words, the loss for any tax year/accounting period of a partner is the loss computed by reference to the partnership's accounting period end.

So if, for example, a partnership had a May 2018 accounting period end date, any losses would be included in an individual's tax return for 2018/19. For a corporate shareholder the loss would be included in its accounting period that incorporated the May 2018 partnership results.

Once a partner's share of the tax-adjusted loss has been ascertained and allocated, it is then relieved in accordance with the income or corporate tax loss relief rules (depending upon whether the partner is a corporate partner or not). This may have wider practical implications for non-corporate partners because if, for example, a partner were to die and his losses could not be fully relieved, the unrelieved balance could not be used by any other partner or by any beneficiaries under his will. This even applies when one party to a marriage succeeds to a business on the death of the other.

The effect of a loss is, of course, to reduce for tax purposes the income against which the loss is set, thereby normally reducing the

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