“When this section applies
“(1) This section applies for a limited partnership and an income year when, but for this section, a deduction by virtue of section HG 2 or HG 12 is allowed to—
“(2) The partner is denied the deduction for an income year to the extent to which their limited partnership deduction for the income year is greater than the amount (the partner’s basis) calculated using the formula in subsection (3) on the last day of the income year.
“(3) For the purposes of subsection (2), the amount that is the partner’s basis is calculated using the following formula:
| ||investments − distributions + income − deductions − disallowed amount.|
“Definition of items in formula
“(4) The items in the formula are defined in subsections (5) to (9).
“(5) Investments is the total of—
“(6) Distributions is the total of—
“(7) Income is the total of—
“(b) capital gain amounts under section CD 44(7)(a) (Available capital distribution amount) that the partner would have by virtue of section HG 2 in the income year and previous income years, if the partner were treated as a company for the purposes of section CD 44(7)(a), unless the gain is accounted for under paragraph (a):
“(8) Deductions is the total of—
“(a) expenditure or loss in previous income years, to the extent to which the expenditure or loss is incurred by virtue of section HG 2 in the partner deriving income by virtue of section HG 2, excluding any deductions denied in those previous years under this section:
“(b) capital loss amounts under section CD 44(9) that the partner would have by virtue of section HG 2 in the income year and previous income years under section HG 2, if the partner is treated as a company for the purposes of section CD 44(9), unless the loss is accounted for under paragraph (a):
“(9) Disallowed amount is the amount of investments, as defined in subsection (5), made by the partner within 60 days of the last day of the income year, if those investments are or will be distributed or reduced within 60 days after the last day of the income year.
“(10) This section does not deny a partner (the exiting partner) a deduction that is equal to or less than the amount of net income that the exiting partner has for the amount paid or payable to the exiting partner for the disposal of their partner’s interests, ignoring other transactions.
“Relationship with subject matter
“(11) This section is modified by sections HZ 3 and HZ 4 (which relate to transitions to limited partnerships).
“(12) In this section,—
“capital contribution includes a capital contribution for the purposes of the Limited Partnerships Act 2008
“limited partnership deduction means, for the partner and the income year, the amount of any deductions that the partner would be allowed if the partner is treated as having no income or deductions other than those that arise by virtue of sections HG 2 and HG 12
“partner’s associate means, for a partner, a person who is not a partner of the relevant limited partnership, and who is—
“secured amounts means, for the partner, the lesser of—
“Defined in this Act: amount, capital contribution, deduction, dividends, entering partner, FIF, FIF income, income, income year, limited partnership deduction, net income, net loss, partner, partner’s associate, partnership,