Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012

85 Limitation on deductions by partners in limited partnerships
  • (1) Section HG 11(7)(a) is replaced by the following:

    • (a) income that the partner has by virtue of section HG 2 in the income year and previous income years:

    • (ab) if the partner has FIF income or a FIF loss, an amount under subsection (7B):.

    (2) After section HG 11(7), the following is inserted:

    Formula
    • (7B) The amount described in subsection (7)(ab) is given by the following formula, but if the calculation returns a negative number, the amount is zero:

      dividend –FIF amount.
    Definition of items in formula
    • (7C) In the formula,—

      • (a) dividend is the amount that would be the partner's share of the dividend paid by a FIF to the limited partnership, if section CD 36(1) (Foreign investment fund income) were ignored:

      • (b) FIF amount is––

        • (i) zero, if subparagraph (ii) does not apply:

        • (ii) the amount that is the person's FIF income, for the relevant income year and FIF, if the person has such an amount.

    (3) In section HG 11(12), the definition of capital contribution is replaced by the following:

    capital contribution includes––

    • (a) a capital contribution for the purposes of the Limited Partnerships Act 2008:

    • (b) amounts that the limited partnership is debtor for in relation to the partner, including a loan to the limited partnership and a credit balance in a current account.

    (4) In section HG 11(12), after the definition of capital contribution, the following is inserted:

    guarantor means––

    • (a) a partner, if––

      • (i) the partner secures the relevant debt by guarantee or indemnity:

      • (ii) the partner's associate secures the relevant debt by guarantee or indemnity:

    • (b) a person who is not described in paragraph (a)(i) and (ii) but who secures the relevant debt by guarantee or indemnity, if the partner or a partner's associate also secures the relevant debt as described in paragraph (a)(i) or (ii).

    (5) In section HG 11(12), in the definition of partner's associate, paragraph (a), partner is replaced by partner, but excluding a person under section YA 1 (Definitions), definition of relative, paragraph (v).

    (6) In section HG 11(12), the definition of secured amounts is replaced by the following:

    recourse property means property to which a creditor has recourse, to enforce a guarantee or indemnity for the relevant debt, if the guarantee or indemnity expressly provides recourse to only that property

    secured amounts means, for the partner, the lesser of the following applicable amounts—

    • (a) the amount of the limited partnership's debt ignoring section HG 2 (the secured debt) for which the partner is a guarantor, divided by the total number of guarantors for the secured debt:

    • (b) the market value of the recourse property for the secured debt to the extent of the interest that the partner and the partner's associates have in it, net of higher-ranking calls whether actual, future, or contingent, divided by the total number of guarantors described in the definition of guarantor, paragraph (a), who have an interest in the recourse property or have a partner's associate with an interest in the recourse property.

    (7) In section HG 11, in the list of defined terms, FIF loss is inserted.

    (8) In section HG 11, in the list of defined terms, guarantor, recourse property, and secured amounts are inserted.

    (9) In section HG 11, in the list of defined terms, loan is inserted.