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IZ 4: Tax losses for tax years before 1977–78 tax year
or “Older tax losses from before 1977-78 can still be used today”
You could also call this:

“How companies can use tax losses from before 1991-92”

You can use a company’s tax losses from before the 1991-92 tax year in later years if two conditions are met. First, the company would have been able to carry forward some or all of its tax losses under the old rules. These old rules are in section 188 of the Income Tax Act 1976, but with some changes. The main change is that the continuity percentage is always 40%.

Second, from the start of the 1992-93 tax year until the end of the year you want to use the losses, a group of people must have owned at least 49% of the voting interests in the company. If the company’s value is affected by things other than just voting rights, this group must also own at least 49% of the market value interests. When working out if this 49% rule is met, you use each person’s lowest ownership level during this time.

You can find more information about using loss balances carried forward in section IA 4.

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Next up: IZ 6: Companies’ tax losses for 1990–91 and 1991–92 tax years

or “How companies can use certain tax losses from 1990-1992”
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Part I Treatment of tax losses
Terminating provisions

IZ 5Companies’ tax losses for tax years before 1991–92 tax year

  1. A company’s loss balance for a tax year before the 1991–92 tax year may be used under section IA 4 (Using loss balances carried forward to tax year) if—

  2. the company would have been entitled to have some or all of the tax loss under section 188 of the Income Tax Act 1976 carried forward to a later tax year, if that section had continued to apply in the later tax year, as modified by section 188AA of that Act and as if the continuity percentage referred to in section 188(7) of that Act were always 40%; and
    1. for the period starting on the first day of the 1992–93 tax year and ending on the last day of the later tax year, a group of persons holds total minimum voting interests in the company that add up to at least 49%.

      1. For the purposes of subsection (1)(b),—

      2. if, during the period a market value circumstance exists for the company, the group of persons must also hold for the period total minimum market value interests in the company that add up to at least 49%:
        1. a minimum interest of any person in the company in the period is equal to the lowest interest that the person has in the period.

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