IA 5 Restrictions on companies’ loss balances carried forward
General statement

(1)

A company’s tax loss component is carried forward in a loss balance only if the minimum continuity requirements of subsections (2) and (3) are met. The tax loss component includes an unused tax loss component carried forward from an earlier income year.

Continuity of voting interests

(2)

A tax loss component is carried forward in a loss balance under section IA 3(4) only if a group of persons holds for the continuity period minimum voting interests in the company that add up to at least 49%.

Continuity of market value interests

(3)

If a market value circumstance exists for the company at any time during the continuity period, the group of persons must also hold for the continuity period, minimum market value interests in the company that add up to at least 49%.

Breach of continuity of ownership in period

(4)

If a tax loss component cannot be carried forward because the requirements of subsections (2) and (3) are not met, the company may apply section IP 3 (Continuity breach: tax loss components of companies carried forward) to determine whether some or all of the tax loss component is carried forward in a loss balance.

Avoidance arrangements

(5)

Section GB 3 (Arrangements for carrying forward loss balances: companies) may apply to treat a company as not meeting the requirements of subsection (2) or (3).

Some definitions

(6)

In this section,—

continuity period means the period of time from the start of the income year that corresponds to the tax year in which a tax loss component is included in the tax loss to the end of the income year that corresponds to the tax year in which the company uses the tax loss component

minimum market value interest, for a person and a continuity period, means the lowest market value interest they have in the company during the continuity period

minimum voting interest, for a person and a continuity period, means the lowest voting interest they have in the company during the continuity period.

Defined in this Act: company, continuity period, corresponding income year, group of persons, income year, loss balance, market value circumstance, market value interest, minimum market value interest, minimum voting interest, tax loss component, tax year, voting interest

Compare: 2004 No 35 s IF 1(1)

Section IA 5(1): substituted (with effect on 1 April 2008), on 7 December 2009, by section 57(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IA 5(4): substituted (with effect on 1 April 2008), on 7 December 2009, by section 57(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IA 5(6) minimum market value interest: amended (with effect on 1 April 2008), on 7 December 2009, by section 57(3)(a) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).

Section IA 5(6) minimum voting interest: amended (with effect on 1 April 2008), on 7 December 2009, by section 57(3)(b) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).