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LLP and Sole Trader Income

LLP losses

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Hi Everyone,

I have a client who has LLP partner income and sole trader.

This year they have shut the LLP with a terminal loss allocation of 70K, his capital contribution was 5K so can he only offset 5K of sideways losses?

In addition the he was paid 10k as a consultant to shut the firm down. Can this be offset against the 70K or is this treated separately as sole trader income and paid at normal rates?

thanks 

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By tonycourt
25th May 2019 22:00

Before getting into what can be done with the loss I have a question about the quantum. Are you saying the total loss for the LLP is £70,000 or your client's share is £70,000?

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By Kentish1
26th May 2019 00:35

The clients specific allocation is £70K loss - thanks

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By tonycourt
26th May 2019 15:17

I'm writing this using my phone so excuse the brevity and any typos.

Presumably the partner remains liable to meet the losses (otherwise they aren't his). That being so, his capital contribution is £75,000 not £5,000 (s.108(8)) ITA 2007. It follows, I believe, that the general restriction on sideways loss relief will cap it at £50,000, which can be used against his general income including profits from his sole trader consultancy (£10,000 less expenses). He can claim terminal loss relief for the unused losses, £25,000, against earlier partnership profits subject to the usual rules.

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