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IA 6: Restrictions on companies grouping tax losses
or “Rules for companies sharing tax losses within a group”
You could also call this:

“Special rules limit the use of certain types of tax losses”

You need to know about special rules for certain types of tax losses. These rules are different from the general rules that apply to most tax losses. Here’s what you need to know:

The special rules apply to:

  • Excess spending by investment funds
  • Losses from overseas companies (called attributed CFC net losses)
  • Losses from foreign investments (called FIF net losses)
  • Losses of mineral miners related to their mining areas
  • Losses of some types of investment companies (called multi-rate PIEs)

For each of these types of losses, there are specific rules about how they can be used. These rules are found in different parts of the tax law.

The special rules are designed to limit how these losses can be used, which is why they’re called “ring-fenced” losses. This means they can only be used in certain ways, unlike regular tax losses which have fewer restrictions.

If you have one of these types of losses, you’ll need to look at the specific rules that apply to that type of loss. The general rules for tax losses don’t apply in these cases.

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Next up: IA 8: Restrictions relating to schedular income

or “Rules for using tax losses when calculating schedular income tax”
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Part I Treatment of tax losses
General rules for tax losses

IA 7Restrictions relating to ring-fenced tax losses

  1. Sections IA 2 to IA 4 (the general rules) do not apply to an amount referred to in subsections (2) to (8).

  2. For the purposes of the application of sections IA 5, IA 6, IA 9, and IA 10, and subpart IB (Carrying forward companies’ loss balances: continuity of business activities), a ring-fenced tax loss under this section is treated as if it were a tax loss component.

  3. Repealed

  4. Repealed

  5. The general rules do not apply to excess expenditure of an investment fund under sections DV 5 and DV 7 (which relate to investment funds) except for—

  6. the amount under section DV 5(4)(a) that the fund must treat as a tax loss component under section IA 2(4)(a)(i); and
    1. the amount under section DV 7(2) that the fund chooses to treat as a tax loss component under section IA 2(4)(a)(ii).

      1. The general rules do not apply to an attributed CFC net loss except a surplus under section IQ 2(3) (Ring-fencing cap on attributed CFC net losses). The provisions that deal with this net loss, other than the surplus amount, are sections IQ 2, IQ 4, and IQ 6 to IQ 9 (which relate to foreign losses).

      2. The general rules do not apply to a FIF net loss except a surplus amount under section IQ 3(3) (Ring-fencing cap on FIF net losses). The provisions that deal with this net loss are sections IQ 3, IQ 5, and IQ 6 to IQ 9.

      3. The general rules do not apply to a net loss of a mineral miner to the extent to which the net loss relates to a permit area. The provisions that deal with these net losses are sections IS 1 to IS 4 and IS 6 (which relate to mineral miner's tax losses).

      4. Repealed

      5. Repealed

      6. The general rules do not apply to a multi-rate PIE's net loss when the PIE does not calculate and pay tax using the provisional tax calculation option under section HM 44 (Provisional tax calculation option).

      Compare
      Notes
      • Section IA 7(1B) heading: inserted (with effect on 1 April 2008), on , by section 59(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 7(1B): inserted (with effect on 1 April 2008), on , by section 59(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 7(1B): amended (with effect on 1 April 2020), on , by section 97(1) (and see section 97(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8)
      • Section IA 7(2) heading: repealed, on , pursuant to section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
      • Section IA 7(2): repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
      • Section IA 7(3) heading: repealed, on , pursuant to section 296(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7(3): repealed, on , by section 296(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7(5): amended (with effect on 1 April 2008), on , by section 296(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7(6): amended (with effect on 1 April 2008), on , by section 59(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 7(6): amended (with effect on 1 April 2008), on , by section 296(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7(7): amended (with effect on 1 April 2008 and applying for the 2008–09 income year and later income years beginning before 1 April 2011), on , by section 149(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section IA 7(7): amended (with effect on 1 April 2011 and applying for income years beginning on or after that date), on , by section 149(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section IA 7(7): amended, on , by section 94(1)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7(7): amended, on , by section 94(1)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7(7): amended, on , by section 94(1)(c) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7(8) heading: repealed, on , pursuant to section 143(1) (and see section 143(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 7(8): repealed, on , by section 143(1) (and see section 143(3) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 7(9) heading: repealed, on , pursuant to section 149(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14)..
      • Section IA 7(9): repealed, on , by section 149(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section IA 7(10) heading: substituted, on (applying for the 2010–11 and later income years), by section 296(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7(10): substituted, on (applying for the 2010–11 and later income years), by section 296(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms LAQC: repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
      • Section IA 7 list of defined terms life insurer: repealed, on , by section 296(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms loss-attributing qualifying company: repealed, on , by section 172 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
      • Section IA 7 list of defined terms loss balance: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IA 7 list of defined terms mineral miner: inserted, on , by section 94(2)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7 list of defined terms mining company: repealed, on , by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7 list of defined terms mining permit area: repealed, on , by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7 list of defined terms multi-rate PIE: inserted, on , by section 296(6)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms new start grant: repealed, on , by section 149(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
      • Section IA 7 list of defined terms non-resident mining operator: repealed, on , by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7 list of defined terms petroleum mining company: repealed, on , by section 143(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
      • Section IA 7 list of defined terms PIE: inserted, on , by section 296(6)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms policyholder net loss: repealed, on , by section 296(5) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms portfolio tax rate entity: repealed, on , by section 296(6)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms provisional tax: inserted, on , by section 296(6)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section IA 7 list of defined terms resident mining operator: repealed, on , by section 94(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IA 7 list of defined terms ring-fenced tax loss: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).