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IE 1: When this subpart applies
or “When tax loss rules apply to company amalgamations”
You could also call this:

“How unused tax losses can be shared when companies merge”

When a company that has the right to carry forward tax losses joins with another company, it can sometimes share its unused tax losses. This applies if the company ending its existence meets certain rules about carrying forward tax losses.

If you’re part of a company that’s joining with another company, and you have tax losses that you haven’t used yet, you might be able to share these losses. The new combined company can use these losses to reduce the amount of tax it needs to pay. This only works for losses that could have been used up to the date when the companies joined.

If the new combined company follows certain rules, it can use these tax losses. It can either use the losses itself or let another company use them to pay less tax.

When we talk about the new combined company, we also mean any other companies that have joined with it before or during the tax year when the losses are being used.

However, if the new combined company was only created when the companies joined together, it can’t use these tax losses in the way we’ve described.

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Next up: IE 3: Treatment of tax losses by amalgamated company

or “How a new company can use tax losses from companies that joined together”
Next

Part I Treatment of tax losses
Treatment of tax losses on amalgamation of companies

IE 2Treatment of tax losses by amalgamating company

  1. This section applies if an amalgamating company that meets the requirements of section IA 5(2) and (3) or IB 3(2) (which relate to the carrying forward of tax losses for companies) ends its existence on a resident’s restricted amalgamation, and has a tax loss for a tax year that—

  2. has not, before the date of amalgamation, been used by the company; and
    1. could be made available and subtracted from the amalgamated company’s net income for the part of the tax year that ends with the date of amalgamation.

      1. If the amalgamated company meets the requirements of section IE 5, the tax loss is attributed to the amalgamated company. The amalgamated company may, after the date of amalgamation, subtract the amount of the tax loss from its net income for the tax year, or make it available to another company to subtract from its net income for the tax year.

      2. In subsection (1)(b), the amalgamated company includes a company that has amalgamated with the amalgamated company before or during the tax year in which the amount is used. The tax year referred to in that subsection means the tax year of the relevant company.

      3. Subsection (1)(b) does not apply if the amalgamated company is incorporated only on the amalgamation.

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      Notes
      • Section IE 2(1): amended (with effect on 1 April 2020), on , by section 106(1) (and see section 106(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
      • Section IE 2(3): amended (with effect on 1 April 2008), on , by section 106(2) (and see section 106(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).