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Readers' forum : Capital contributions

04 July 2017
Issue: 4606 / Categories: Forum & Feedback

Treatment of trading losses before the completion of a property development.

My clients husband and wife entered into a joint venture with a property developer in the UK. An LLP was set up to own the property; my clients joined as members in the form of a limited partnership (made up of the husband and wife) and the developer joined with her limited company. Under the legal agreement both my clients and the developer are to provide ‘capital contributions’ to the joint venture LLP and the ‘holding’ in the LLP is pari-passu to these contributions. Once the development is completed after some two years the property will be sold on the open market.

Assuming a profit is realised the agreement provides that after a repayment of capital to the partners they will receive a fixed return of interest on the funds provided with any surplus profits split in an agreed ratio between my clients and the...

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