Tax loss components carried forward

IP 3 Continuity breach: tax loss components of companies carried forward
When this section applies

(1)

This section applies for the purposes of section IA 4 (Using loss balances carried forward to tax year) if a breach occurs in the requirements for continuity of ownership of section IA 5 (Restrictions on companies’ loss balances carried forward) that enable a tax loss component included in a company’s loss balance to be carried forward to or from a tax year.

Tax loss components for earlier income years

(2)

Despite the breach, a tax loss component arising in an earlier income year is carried forward to a tax year (year A) to the extent to which—

(a)

the requirements for continuity of ownership would be met if the continuity period included only part of the income year of the company that corresponds to year A; and

(b)

the company has net income for part of the corresponding income year; and

(c)

the company provides the Commissioner with adequate financial statements under section IP 6 calculating the amount of the company’s net income for the relevant part of the corresponding income year.

Limit on tax loss components carried forward to year A

(3)

The total tax loss components carried forward under subsection (2) must be no more than the amount calculated under subsection (2)(b) and (c), although the amount may be increased if section IP 5 applies.

Tax loss components of year of breach

(4)

Despite the breach, a tax loss component is carried forward to the tax year (year B) from year A to the extent to which—

(a)

the requirements for continuity of ownership would be met if the continuity period included only part of the income year that corresponds to year A; and

(b)

the company provides the Commissioner with adequate financial statements under section IP 6 calculating the amount of the company’s net loss for the part of year A.

Limit on tax loss components carried forward to year B

(5)

The amount of the tax loss component carried forward under subsection (4) must be the least of—

(a)

the part-year net loss calculated under subsection (4)(b):

(b)

if the company has net income for year A, zero:

(c)

if the company has a net loss for year A, the company’s net loss for year A.

Defined in this Act: amount, Commissioner, company, continuity period, corresponding income year, income year, loss balance, net income, net loss, tax loss component, tax year

Compare: 2004 No 35 s IF 1(2), (3)