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Calculation of partnership losses

This guidance note sets out what relief is available for trading losses incurred by the partners in a partnership.

Partnership trading losses are computed in the same way as profits, see the Trading profits of a partnership guidance note. Once the partnership loss has been computed, it is allocated between the partners in accordance with the profit sharing ratios for that accounting period see the Allocation of partnership profit or loss guidance note.

If the partnership makes a loss, once the loss has been allocated, each partner is then able to claim loss relief based on their own personal circumstances. There is no concept of a ‘partnership loss’. The loss belongs to the partners and loss relief claims are made individually.

For partnerships continuing in business, and partners continuing in partnership year after year, losses are relieved in accordance with the relevant income or corporation tax loss relief rules (depending on whether the partner is a corporate partner or not).

There is specific anti-avoidance legislation which restrict the relief for trading losses