Income Tax Act 2004

GC 29 Application of sections GC 29 to GC 31

• (1) This section and sections GC 30 and GC 31 apply to an arrangement and a person (participant), who is a taxpayer and is a party to the arrangement or affected by the arrangement, if at any time after the arrangement commences—

  • (a) there is a person who sells or issues, or promotes the selling or issuing of, the arrangement, whether or not for remuneration; and

  • (b) the participant and any affected associates of the participant, considered together, have for a period—

    • (i) deductions resulting from the arrangement, other than—

      • (A) deductions arising under this section and sections GC 30 and GC 31:

      • (B) net losses of a loss attributing qualifying company, to the extent that shareholders with effective interests in the company are deemed under section HG 16 to incur amounts of loss that correspond to the net losses; and

    • (ii) assessable income resulting from the arrangement, other than assessable income arising under this section and sections GC 30 and GC 31, that in total is less than the total amount of deductions referred to in subparagraph (i); and

  • (c) the period referred to in paragraph (b) for a participant, or a group consisting of a participant and the affected associates of the participant, is—

    • (i) the earliest income year in which an interest in the arrangement was acquired by the participant or an affected associate of the participant; or

    • (ii) the income year referred to in subparagraph (i) together with the next following income year; or

    • (iii) the income year referred to in subparagraph (i) together with the next following income year and the second following income year; and

  • (d) as part of or for the purposes of the arrangement, the participant or an affected associate of the participant borrows a limited-recourse amount under a limited recourse loan; and

  • (e) on the balance date, or the latest balance date, of the participant and affected associates of the participant that ends a period referred to in paragraph (c)(i) to (iii) for which paragraph (b) is satisfied, the participant and the affected associates of the participant hold, as part of the arrangement, property with a total cost that is—

    • (i) less than twice the total of the limited-recourse amounts referred to in paragraph (d) that the participant and the affected associates of the participant borrowed on or before the balance date; and

    • (ii) more than 142.85% of the total cost of the part of that property that is—

      • (A) land:

      • (B) buildings:

      • (C) plant:

      • (D) machinery:

      • (E) shares in a listed company that in total represent a direct voting interest of 10% or less in the listed company:

      • (F) shares and options that are acquired or created with an intention that the shares or options will produce income that is monetary remuneration of a participant under sections CE 2 to CE 4:

      • (G) shares in a foreign company, if the proceeds of a disposal of the shares would not be assessable income of the holder other than under the FIF rules.

  (2) The assessable income and deductions resulting from an arrangement for each person in a group of persons, for the purposes of subsection (1)(b) and section GC 31, and the cost of property that is held by each person in the group as part of the arrangement, for the purposes of subsection (1)(e), are consolidated for the elimination of intra-group balances in accordance with generally accepted accounting practice.

  (3) If a group of persons consists of persons who are a partnership and the partners in a partnership, a joint venture and the partners in the joint venture, or a loss attributing qualifying company and the shareholders in the loss attributing qualifying company, the assessable income and deductions resulting from an arrangement for each person in the group for the purposes of subsection (1)(b) and section GC 31, and the cost of property that is held by each person in the group as part of the arrangement for the purpose of subsection (1)(e), are calculated using the proportionate method in accordance with generally accepted accounting practice for partnerships.

  Compare: 1994 No 164 s ES 1

  Subsection (1)(b) (that part before subpara (i)(A)) was amended, as from 1 October 2005, by section 204(1)(a) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting the words “or losses”.

  Subsection (1)(b)(i)(B) was substituted, as from 1 October 2005, by section 204(1)(b) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

  Subsection (1)(b)(ii) was amended, as from 1 October 2005, by section 204(1)(c) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by omitting the words “or losses”.

  Subsection (1)(b)(ii) was amended, as from 1 October 2005, by section 204(2) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by inserting the word “assessable” before the word “income” in both places that it occurs.

  Subsection (1)(e)(i) was amended, as from 1 October 2005, by section 204(3) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the words “date; and” for the word “date:”.

  Subsection (1)(e)(ii)(F) was amended, as from 1 October 2005, by section 204(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the expression “CE 4:” for the expression “CE 4.”.

  Subsection (1)(e)(ii)(G) was inserted, as from 1 October 2005, by section 204(4) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111).

  Subsection (2) was amended, as from 1 October 2005, by section 204(5) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the words “assessable income and deductions” for the words “income, deductions, and losses”.

  Subsection (3) was amended, as from 1 October 2005, by section 204(6) Taxation (Venture Capital and Miscellaneous Provisions) Act 2004 (2004 No 111) by substituting the words “assessable income and deductions” for the words “income, deductions, and losses”.