Income tax Dates
From the 2020-21 income year, unless there is a major change in the business within 5 years following a change in ownership, you can carry forward losses for your company even if you do not meet the requirements of the shareholder continuity test. This is the business continuity test.
This test only applies to losses from the 2013-14 income year and onwards.
The business continuity test does not apply to any breach of continuity that occurred in the 2019-20 or earlier income years.
You can still meet the requirements for the business continuity test and still make some changes to the business post-acquisition. This may include changes to:
- increase efficiency
- respond to advances in technology
- the scale of the business, including accessing different markets
- product or service range (excluding land), by either:
- withdrawing unprofitable products or services
- adding new products or services that are related to those already being produced.
Finance companies with losses mainly from writing off bad debts are excluded from the 5 year limit. The requirement to not undergo a major change is therefore ongoing beyond the 5 year limit.
Mineral mining companies cannot use the business continuity test. To carry losses forward, they must meet the shareholder continuity test.
Further guidance on the continuity of business test is in the interpretation statement on our Tax Technical website.
Interpretation statement 22/06: Loss carry-forward – continuity of business activities
Claiming the loss
To claim the loss from a tax year, you'll need to file a Companies income tax return - IR4 that lists your loss under 'Net loss to carry forward'. In the following year's IR4 this will be the loss brought forward, which reduces the company's income and the amount of tax it needs to pay.
File a Companies income tax return - IR4
Anti-avoidance rules
Specific anti avoidance rules apply for this.
Further information and examples are available in the 'Commentary' for this change on our Tax Policy website.
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