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IB 1: Purpose
or “This provision explains why companies can carry forward tax losses to support growth and adaptation”
You could also call this:

“When a company changes ownership too much and can't use past tax losses”

In this part of the law, you’ll learn what an ‘ownership continuity breach’ means for a company. It’s about what happens when a company doesn’t keep the same owners over time.

An ownership continuity breach happens when a company doesn’t follow the rules about keeping the same owners. These rules are explained in section IA 5. If a company follows these rules, it can carry forward its tax losses to use in the future. But if it breaks these rules, that’s called an ownership continuity breach.

When a company has a tax loss, it’s called a ‘tax loss component’. If the company keeps the same owners as required, it can keep this tax loss for later use. This saved-up tax loss is called a ‘loss balance’.

So, in simple terms, an ownership continuity breach is when a company changes its owners too much, and because of that, it might not be able to use its past tax losses in the future.

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Next up: IB 2B: When subsequent ownership continuity breach regarded as occurring

or “When later ownership changes affect a company's ability to use past tax losses”
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Part I Treatment of tax losses
Carrying forward companies’ loss balances: continuity of business activities

IB 2Meaning of ownership continuity breach

  1. In this subpart, an ownership continuity breach, for a company, means a breach of the requirements for continuity of ownership of section IA 5 (Restrictions on companies’ loss balances carried forward: continuity of ownership) that, if met, enable a tax loss component of the company to be carried forward in a loss balance.

Notes
  • Section IB 2: inserted (with effect on 1 April 2020), on , by section 99(1) (and see section 99(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).