Hi all,
Hopefully someone has had to do this...
I have a client who is a Ltd Company and a corporate member of an LLP, the Ltd co has not traded during the year but is allocated its share of a "loss" as a member of the LLP.
In reporting to HMRC, I wouldn't classify this as a dormant entity by virtue of its profit/loss share as an LLP member, however, do you simply reflect its share of the loss as a negative figure in the "Other operating income" line in the P&L for CT600 purposes and accounts preperation.
Appreciate any pointers..
Thanks
Smithie
Replies (6)
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If the company has the same year end as the LLP then the company's share of the LLP's loss would be reported in full on the CT600 for the company's same AP.
If the company has a different year end than the LLP then the losses of the LLP would be time apportioned to the company's AP.
If the company and LLP year end are not coterminous you will find that it may be necessary to draft another set of accounts for the LLP to cover the company's AP (presuming the LLP continues to trade). You might find that when you do this the LLP loss has been turned into a profit anyway.
If there is a time-apportioned LLP loss then this would be shown in box 122 on the short CT - Trading Losses Case 1.
The loss of the LLP is treated as a loss arising from a different trade as that of the company and could not be set off against the company's own trading profit if there was any. Since the company is dormant this is not a problem.
The loss can be carried forward and set off against any subsequent profits of the LLP only.
Use the white space of the CT return (or a PDF attachment) to tell HMRC where the loss has come from and that you are carrying it forward.
Nothing to do with the accounts
All you need to do is make an adjustment in the tax computation to bring in the loss, which will then feed into Box 122 of the CT return (assuming the loss is a trading loss).
EDIT - crossed with Triggle. But I disagree with one of his points - company would be entitled to offest its LLP loss against any other profits or gains of the same period (and indeed carry it back against other profits). All subject to restriction on amount of capital contributed, liability on winding up etc
BKD - are you sure of the set off against current year/prior year profits/losses? I've not seen this anywhere and believe there is no right of set off at any time. Any pointers to legislation on this?
Also, the loss would be a trading loss as the partnership would necessarily be carrying on a trade or profession to be a properly constituted partnership.
Picking up on Triggle's comments
I agree with BKD on the loss set-off point; the company is essentially deemed to be carrying on its share of the trade as a result of S. 1258 CTA 2009, which corresponds to S. 848 ITTOIA 2005 for individuals.
There's equivalent provision in S. 59 TCGA 1992, which is the authority for a corporate member of a trading partnership to be considered to be a trading company.
I have seen the concern expressed that there's no "notional trade" deeming provision in CTA 2009 as there is in S. 852 ITTOIA 2005 for individuals, but S. 852 only exists so that the profits of the "notional trade" can then be allocated to basis periods under S. 853.
The same job is achieved much more simply for corporate partners by S. 1265 CTA 2009, the effect of which Triggle has described, and which I think is the reference point that Smithie's looking for.
On Triggle's it has to be a trading loss point though, I would disagree.
There needs to be a business for there to be a partnership and an LLP can only be incorporated for the purposes of carrying on a business (although you do then get LLPs that don't carry on a business). Business though is a wider term than trade, and can include a property business or some other investment business.
To be specific (ie pedantic)
I think s1273 is the relevant legislation (which effectively repeats and expands upon s1258 with regard to LLPs)