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HA 42: Paying qualifying company election tax
or “How to pay the special tax to become a qualifying company”
You could also call this:

“How the law measures your ownership in a company for tax purposes”

When you own part of a company, you have something called an ‘effective interest’. This is how the law measures how much of the company you own when figuring out your tax responsibilities.

Your effective interest is usually the same as your voting interest in the company. Your voting interest is how much say you have in the company’s decisions.

However, sometimes the value of the company in the market becomes important. When this happens, your effective interest is calculated differently. It becomes the average of two things: your voting interest and your market value interest. Your market value interest is based on how much your share of the company is worth in the market.

This definition of effective interest is used in section HA 8 of the law to work out your tax responsibilities for the company.

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Next up: HA 44: Measuring effective interests

or “How to calculate your ownership in a company”
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Part H Taxation of certain entities
Qualifying companies (QC)

HA 43Meaning of effective interest

  1. This section defines an effective interest in a company, which is the measure of a person’s liability under section HA 8.

  2. Effective interest for a person and a company, at a particular time or for an income year, means—

  3. the person’s voting interest in the company at the time or for the income year, unless paragraph (b) applies:
    1. if there is a market value circumstance for the company at the time or at some time during the income year, the average of—
      1. the person’s voting interest in the company at the time or for the income year; and
        1. the person’s market value interest in the company at the time or for the income year.

        Compare
        • 2004 No 35 s OB 1 effective interest