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When shareholders choose to become a look-through company (LTC) they agree to use the look-through company rules. This means if there is income tax to pay on the company's profit, they must pay this themselves.  

When a new company becomes a look-through company

If a company is newly incorporated or first starts to trade, you need to send us an election form on or before the date the company's first return is due, including any approved extension of time.

The election form can be completed after the return is filed if we receive it on or before the return's due date. It will then apply from:

  • the start of the first income year for a new company
  • the start of the first active income year for a non-active company that has started trading.

When an existing company becomes a look-through company

If a company has been in existence and trading for some time, you need to send us the election form before the start of the income year it applies for.

Company losses

When a company becomes a look-through company, any loss balance from previous years is cancelled and cannot be carried forward. These losses cannot be used by the look-through company and are no longer available to the company.

First year calculation

When an existing company becomes a look-through company each owner's income is calculated. Owners can draw down or distribute the company’s reserves without having to pay tax on this distribution. This treatment is not intended to apply to previously accumulated company reserves. Each owner declares their part of this income in their own income tax return.

To find out more about income for the first year of a look-through company, check out our guide.

Last updated: 01 Apr 2024
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