Nonsensical tax regulations

I have come across this issue previously but not for a few years; this year it has raised its head once again.

Scenario is as follows: client has his own sole trader business and is a partner in another business with his wife.

The sole trader business is profitable in the tax year to 5th April 2011, the partnership has made a small loss; both are schedule D tax and there is no problem in offsetting the client's share of the partnership loss in the year against his sole trader profit before calculating tax.

However, the partnership also has prior year losses, yet despite being the same tax schedule, we cannot set off the brought forward losses against current year profits because in the words of HMRC “... they are not the same business ...”.

The brought forward losses can only be carried forward to be set off against future profits in the same business.

So why can losses from one business be set off against profits from another business in the same tax schedule in the same tax year, but brought forward losses from that same business not be allowed?

Can anyone explain the logic in this to me?

Regards, Paul