From the 2020/2021 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 2013/2014 income year and onwards.
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), as long as the new products or services both:
- use existing assets to produce
- are related to the products and services already being produced.
Finance companies with losses mainly from with writing off bad debts are excluded from the five year limit. The requirement to not undergo a major change is therefore ongoing beyond the five year limit.
Mineral mining companies cannot use from the business continuity test. To carry losses forward, they must meet the shareholder continuity test.
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.
We will publish a detailed summary of the anti-avoidance rules for the business continuity test in a special report in April 2021 on the Tax Policy website. Once this report is available, we will link to it here.