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Income Tax Act 2007

Memorandum accounts - Imputation credit accounts (ICA)

OB 41: ICA debit for loss of shareholder continuity

You could also call this:

“Company loses tax credit when shareholders change significantly”

When a company loses shareholder continuity, it gets an imputation debit. This debit is equal to the amount of unused imputation credit in the company’s account at the time continuity is lost. The debit happens right when the shareholder continuity is lost.

This rule doesn’t apply to qualifying companies, except in special cases described in section HA 18. For qualifying companies, that section is more important than this one.

Sometimes, section GB 34 might stop this rule from applying to a company. That section talks about arrangements for carrying amounts forward in an ICA (Imputation Credit Account).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518791.

Topics:

Money and consumer rights > Taxes

OB 40: ICA attribution for personal services, or

“Personal services income attribution can affect a company's tax credits”

OB 42: ICA on-market cancellation, or

“Company gets tax debit when buying back its own shares on the market”

Part O Memorandum accounts
Imputation credit accounts (ICA)

OB 41ICA debit for loss of shareholder continuity

An ICA company has an imputation debit for the amount equal to the amount of an imputation credit retained in the imputation credit account and unused at the time at which shareholder continuity is lost.
The imputation debit in subsection (1) is referred to in table O2: imputation debits, row 14 (debit for loss of shareholder continuity).
The debit arises at the time shareholder continuity is lost.
This section does not apply to a qualifying company in circumstances other than those set out in section HA 18 (Treatment of dividends when qualifying company status ends), and that section overrides subsections (1) to (3).
Section GB 34 (ICA arrangements for carrying amounts forward) may exclude a company from the application of this section.

Compare

2004 No 35 ss HG 13(6), ME 5(1)(i), (2)(h)

Notes

Section OB 41(1): amended (with effect on 1 April 2008), on 7 December 2009, by section 87(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section OB 41(3) heading: substituted (with effect on 1 April 2008), on 7 December 2009, by section 87(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section OB 41(3): substituted (with effect on 1 April 2008), on 7 December 2009, by section 87(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section OB 41(3B) heading: inserted (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 117(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section OB 41(3B): inserted (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 117(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section OB 41 list of defined terms qualifying company: inserted (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 117(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section OB 41 compare note: amended (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 117(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).