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Loss through BVI Limited partnership- tax loss?

Can UK IT relief be claimed on a loss on failure of a UK unlisted company held through a BVI LP ?

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Client subscribed through a BVI Limited Partnership in shares of an unlisted  UK trading company which has now failed.

Given that a BVI  LP is considered by HMRC as transparent for tax purposes, does  ITA 2007 s135(2) apply?

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By pumnoo
18th Nov 2017 02:20

First of all

Per INTM180030 (and as you mentioned) BVI LP is considered by HMRC as transparent. Therefore shares of company will be treated as owned by individual.

Normally a relief is available for the loss on disposal of share held in qualifying trading company or under EIS relief.

ITA 2007 S135(2) states that the relief is only available when the shares were originally subscribed in consideration of money or money's worth.

If HMRC considers BVI LP as transparent entity then all relevant rules pertinent to partnership under UK law will be considered according to which shares acquired by partnership will be deemed as acquired by partners.

Therefore I believe consideration paid by partnership will be considered as paid by partners. Hence UK IT relief can be claimed on a loss on failure of a UK company held through a BVI LP unless it is caught under hybrid mismatch provisions re double deduction / non-inclusion.

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