Income Tax Act 2004

  • repealed
  • Income Tax Act 2004: repealed, on 1 April 2008, by section ZA 1(1) of the Income Tax Act 2007 (2007 No 97).
IF 1 Net losses may be offset against future net income

(1)

Subject to the succeeding provisions of this section, no taxpayer being a company (in this subsection referred to as the loss company) may carry forward, in accordance with section IE 1(2), the whole or any part of a net loss for any income year (in this subsection referred to as the year of loss) to any later income year (in this subsection referred to as the year of carry forward), unless there is a group of persons—

(a)

the aggregate of whose minimum voting interests in the loss company in the period from the beginning of the year of loss to the end of the year of carry forward (in this subsection referred to as the continuity period) is equal to or greater than 49%; and

(b)

in any case where at any time during the continuity period a market value circumstance exists in respect of the loss company, the aggregate of whose minimum market value interests in the loss company in the continuity period is equal to or greater than 49%,—

and, for the purposes of this subsection, the minimum voting interest or minimum market value interest (as the case may be) of any person in the loss company in the continuity period is equal to the lowest voting interest or market value interest (as the case may be) in the loss company which that person has during the continuity period.

(2)

Subsection (1) does not apply to prevent any company from carrying forward, in accordance with section IE 1(2), the whole or part of any net loss for any income year (in this subsection referred to as the year of loss) where and to the extent that—

(a)

subsection (1) would not have applied to prevent carry forward if regard were had, for the purposes of applying that subsection (to the extent to which it requires regard to be had to the circumstances in the year of loss and without prejudice to the application of that subsection to the extent to which it requires regard to be had to later periods), to part only of the year of loss; and

(b)

adequate accounts have been prepared and furnished to the Commissioner by the company relating to that part of that year of loss which detail sufficiently that part of the net loss for the year of loss which was reasonably and fairly attributable to that part of that year of loss,—

in which event that claim for carry forward is allowed in respect of that part of the net loss for the year of loss as those accounts indicate was reasonably and fairly attributable to that part of that year of loss.

(3)

Subsection (1) does not apply to prevent any company from carrying forward, in accordance with section IE 1(2), the whole or part of any net loss for any income year (in this subsection referred to as the year of loss) to any later income year where and to the extent that—

(a)

subsection (1) would not have applied to prevent the carry forward if regard were had, for the purposes of applying such subsection (to the extent to which it requires regard to be had to the later income year and without prejudice to the application of such subsection to the extent to which it requires regard to be had to earlier periods), to part only of the later income year; and

(b)

adequate accounts have been prepared and furnished to the Commissioner by the company relating to that part of that later income year which detail sufficiently that part of the net income for the whole of the later income year which was reasonably and fairly attributable to that part of that later income year,—

in which event that claim for carry forward to the later income year is allowed in respect of the net loss for the year of loss to the extent to which it does not exceed that amount of net income as those accounts indicated was reasonably and fairly attributable to that part of that later income year.

(4)

For the purposes of this section, where adequate accounts are required to be prepared and furnished to the Commissioner in respect of the net loss or net income of any company which is reasonably and fairly attributable to a period which is part only of an income year of that company, those accounts must be prepared, to the extent to which reasonable and fair, by applying the provisions of this Act to that period as if it were an income year.

(5)

Any taxpayer is entitled to claim to carry forward and offset against net income of the taxpayer in accordance with section IE 1(2) any net loss of the taxpayer for any income year prior to the 1977-78 income year if that taxpayer would have been entitled to claim to carry forward that net loss to that subsequent tax year for the purpose of assessing income tax under section 137 of the Land and Income Tax Act 1954 if the Income Tax Act 1976, the Income Tax Act 1994, and this Act had not been passed.

(6)

Where any taxpayer (being a company) claims, in accordance with section IE 1(2), to carry forward the whole or part of a net loss incurred by it in the 1991-92 income year or any earlier income year (in this subsection referred to as the pre-1993 year of loss) to any later income year, the provisions of subsection (1) do not preclude such claim where—

(a)

the taxpayer would have been entitled to claim to carry forward the whole or part of the net loss to the later income year under section 188 of the Income Tax Act 1976, as that section applied before its repeal and replacement by section 22 of the Income Tax Amendment Act (No 2) 1992, if that section 188 had continued to apply—

(i)

as modified by section 188AA of the Income Tax Act 1976; and

(ii)

as if the continuity percentage referred to in section 188(7) of the Income Tax Act 1976 were always 40%,—

in respect of the later income year; and

(b)

in respect of the period commencing on the first day of the 1992-93 income year and ending with the last day of that later income year (referred to in this subsection as the relevant period), there is a group of persons—

(i)

the aggregate of whose minimum voting interests in the taxpayer in the relevant period is equal to or greater than 49%; and

(ii)

in any case where at any time during the relevant period a market value circumstance exists in respect of the taxpayer, the aggregate of whose minimum market value interests in the taxpayer in the relevant period is equal to or greater than 49%—

and, for the purposes of this paragraph, the minimum voting interest or minimum market value interest (as the case may be) of any person in the taxpayer in the relevant period is equal to the lowest voting interest or market value interest (as the case may be) in the taxpayer which that person has during the relevant period.

Compare: 1994 No 164 s IF 1