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IE 4: Group companies’ treatment of tax losses on amalgamation
or “How companies can use previous tax losses when they join together”
You could also call this:

“How tax losses are treated when companies merge”

When companies join together, or amalgamate, the law treats them in a special way. The new company that forms from this joining is seen as if it were the old companies put together. This means that the people who owned shares in the old companies now own the same number and type of shares in the new company.

This way of looking at things helps decide if the new company can use any tax losses from the old companies. You can use these losses in a few ways:

You might be able to use them or carry them forward under sections IA 3 and IA 4. These sections talk about how you can generally use tax losses.

You might be able to take them away from another company’s income under section IC 5, IQ 4, or IQ 5. These sections are about how one company can use another company’s losses, including losses from overseas.

If the old companies were part of a group, you might be able to take the losses away from the new company’s income under section IC 5, IQ 4, or IQ 5.

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Next up: IP 1: When this subpart applies

or “When rules about company ownership and tax losses are broken”
Next

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

IE 5Applying the continuity provisions when companies amalgamate

  1. The provisions of this Act apply as if the amalgamated company did not exist separately before amalgamation, and was instead the amalgamating companies with the same holders of shares and options over shares, each with the same number and class of shares and options over shares, as they held in the amalgamating company, to determine whether a tax loss or loss balance,—

  2. may be used or is carried forward under sections IA 3 and IA 4 (which relate to the general use of tax losses):
    1. may be subtracted from the net income of another company under section IC 5, IQ 4, or IQ 5 (which relate to a company’s use of another company’s loss, including foreign losses):
      1. in the case of a group company, may be subtracted from the net income of the amalgamated company under section IC 5, IQ 4, or IQ 5.

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