Limit to loss relief

Hamilton & Kinneil (Archerfield) Ltd (HKAL) claimed loss relief on losses made by a limited liability partnership (LLP) of which it was a member along with a Delaware investment vehicle an incorporated limited liability corporation.

HKAL had been set up to develop and run a golf course. The Delaware firm invested $8m while HKAL itself put in no money – but the company was entitled to a third share of the LLP’s capital.

HMRC refused HKAL’s claim saying TA 1988 s 118ZC limited loss relief to nil because the company had made no contribution of capital – and the company would not be liable to contribute assets if the LLP were wound up.

HKAL and others appealed saying HKAL’s contribution was in effect the risk it accepted by being a member of the LLP.

The First-tier Tribunal said “Acquiring a share through operation of...