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Restrictions on the use by certain partnerships of losses, etc., and transitional arrangements concerning these restrictions.
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70.—(1) Section 1013 of the Principal Act is amended—
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(a) in subsection (1), by the substitution for paragraph (d) of the definition of “limited partner” of the following:
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“(d) a person who carries on the trade as a general partner in a partnership otherwise than as an active partner;”,
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(b) in subsection (2), by the substitution for subparagraph (III) of the following:
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“(III) where the individual is a limited partner in relation to a trade by virtue of paragraph (d) of the definition of ‘limited partner’ and the relevant year of assessment is—
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(A) in the case of such a partner where the activities of the trade include the activity of producing, distributing, or the holding of or of an interest in, films or video tapes or the activity of exploring for, or exploiting, oil or gas resources, the year of assessment 1997-1998 or any subsequent year of assessment, subject to subsection (2A), or
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(B) in any other case, the year of assessment 1999-2000 or any subsequent year of assessment, subject to subsection (2B),
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only against income consisting of profits or gains arising from the trade,”,
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(c) in subsection (2A), by the substitution for “Subparagraph (III)” of “Subparagraph (III)(A)”, and
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(d) by the insertion after subsection (2A) of the following:
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“(2B) Subparagraph (III)(B) of subsection (2)(a) shall not apply to—
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(a) interest paid on or before 29 February 2000,
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(b) an allowance to be made in respect of expenditure incurred on or before 29 February 2000, or
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(c) a loss sustained in the year of assessment 1999-2000 which would have been the loss sustained in that year if—
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(i) that year of assessment had ended on 29 February 2000, and
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(ii) the loss were determined only by reference to accounts made up in relation to the trade for the period commencing on 6 April 1999 or, if later, the date the trade commenced and ending on 29 February 2000 and not by reference to accounts made up for any other period.
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(2C) (a) In this subsection—
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‘excepted expenditure’ means expenditure to which the provisions of section 409A apply and expenditure to which the provisions of that section or section 409B would apply but for the provisions of—
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(i) section 409A(5), or
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(ii) paragraph (a) of the definition of ‘specified building’ in subsection (1) or (4) of section 409B,
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as the case may be;
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‘specified deduction’ means the deduction referred to in section 324(2), 333(2), 345(3), 354(3), 370(3), 372E(3) or 372O(3) as the ‘second-mentioned deduction’ or in paragraph 13 of Schedule 32 as the ‘further deduction’;
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‘specified individual’, in relation to a partnership trade, means an individual who is a limited partner in relation to the trade by virtue only of paragraph (d) of the definition of ‘limited partner’, and a reference to a specified individual shall be construed accordingly.
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(b) (i) Subsection (2)(a) shall not apply to a specified individual to which paragraph (c), (d) or (e), as the case may be, applies to the extent that—
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(I) the interest referred to in subparagraph (i) of paragraph (a) of that subsection is interest paid by the individual by reason of his or her participation in a trade referred to in paragraph (c), (d) or (e), as the case may be, in a relevant year of assessment,
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(II) the loss referred to in subparagraph (i) of paragraph (a) of that subsection is a loss sustained by the individual in a trade referred to in paragraph (c), (d) or (e), as the case may be, in a relevant year of assessment,
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(III) the allowance referred to in subparagraph (ii) of paragraph (a) of that subsection is an allowance to be made to the individual for a relevant year of assessment either in taxing a trade or by means of discharge or repayment of tax to which he or she is entitled by reason of his or her participation in a trade referred to in paragraph (c), (d) or (e), as the case may be.
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(ii) Subsection (2)(a) shall not apply to a specified individual to the extent that—
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(I) the interest referred to in subparagraph (i) of paragraph (a) of that subsection is interest paid by the individual on a loan where the proceeds of the loan were used by the partnership to incur excepted expenditure in a relevant year of assessment,
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(II) the loss referred to in subparagraph (i) of paragraph (a) of that subsection arises from the taking into account for the purposes of section 392(1) of an allowance to be made in respect of excepted expenditure, or
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(III) the allowance referred to in subparagraph (ii) of paragraph (a) of that subsection is an allowance to be made to the individual for a relevant year of assessment in respect of excepted expenditure.
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(c) This paragraph applies to a specified individual where—
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(i) the partnership trade consists wholly of the leasing of machinery or plant to a qualifying company within the meaning of section 486B, and
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(ii) the expenditure incurred on the provision of the machinery or plant was incurred under an obligation entered into by the lessor (within the meaning of section 403) and the lessee (within the meaning of section 403) before 1 March 2001.
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(d) This paragraph applies to a specified individual where in charging the profits or gains of the individual’s several trade an allowance in respect of capital expenditure on machinery or plant to which the provisions of section 284(3A) apply has been or is to be made to that individual; but this paragraph shall not apply to such an individual as respects—
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(i) interest paid by that individual on a loan taken out on or after 4 September 2000,
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(ii) an allowance to be made to that individual for capital expenditure incurred on or after 4 September 2000, or
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(iii) a loss sustained in the trade in the year of assessment 2001-2002 or any subsequent year of assessment to the extent that the loss does not arise from the taking into account for the purposes of section 392(1) of an allowance to be made in accordance with the provisions of section 284(3A).
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(e) This paragraph applies to a specified individual where in computing the amount of the profits or gains, if any, of the partnership trade a specified deduction has been or is to be allowed in respect of a premises occupied by the partnership for the purposes of the partnership trade, and—
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(i) the individual became a partner in the partnership before 29 February 2000,
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(ii) the individual made a contribution to the partnership trade before that date, and
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(iii) the qualifying lease in respect of which a specified deduction has been or is to be allowed was granted to or acquired by the partnership before that date;
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but—
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(I) subject to clause (II), this paragraph shall not apply to such an individual as respects—
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(A) interest paid by that individual in,
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(B) an allowance to be made to that individual for, or
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(C) any loss sustained in the trade for,
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any year of assessment for which a specified deduction in respect of the premises is not allowed in arriving at the amount of the profits or gains of the individual’s several trade to be charged to tax or, as the case may be, the loss sustained therein or any subsequent year of assessment, and
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(II) where in computing the amount of the profits or gains, if any, of the partnership trade a second-mentioned deduction (within the meaning of section 354(3)) may be made by virtue of section 354(3), this paragraph shall not apply to such an individual as respects—
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(A) interest paid by that individual on or after 6 April 2004.
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(B) an allowance to be made to that individual for the year of assessment 2004-2005 or any subsequent year of assessment, or
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(C) any loss sustained in that trade in the year of assessment 2004-2005 or any subsequent year of assessment.”.
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(2) This section shall apply as on and from 29 February 2000.
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