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IB 2: Meaning of ownership continuity breach
or “When a company changes ownership too much and can't use past tax losses”
You could also call this:

“When later ownership changes affect a company's ability to use past tax losses”

When a company has a change in ownership that stops it from carrying forward a tax loss, you need to know how future ownership changes are treated. After the first ownership change that stops the tax loss carry-forward, any other changes in who owns the company’s voting rights or market value aren’t seen as new ownership changes. This is true unless the company fails to meet the minimum continuity rules for carrying forward the tax loss.

To check if the company meets these rules, you look at the period from just after the last ownership change that stopped the tax loss carry-forward. This is different from the usual way of checking, which starts at the beginning of the income year when the tax loss was first included in the company’s loss balance.

This rule helps you understand when an ownership change matters for tax purposes, especially when a company has already had one that affected its ability to use past losses.

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Next up: IB 3: When tax loss components of companies carried forward despite ownership continuity breach

or “Companies can keep tax losses after ownership changes if they meet certain conditions”
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Part I Treatment of tax losses
Carrying forward companies’ loss balances: continuity of business activities

IB 2BWhen subsequent ownership continuity breach regarded as occurring

  1. For the purposes of this subpart, once an ownership continuity breach has occurred for a company that, in the absence of section IB 3, prevents a tax loss component of the company from being carried forward to a tax year in a loss balance, a subsequent change in the holders of voting interests or market value interests in the company is not regarded as resulting in a subsequent ownership continuity breach unless the company would not meet the minimum continuity requirements of section IA 5(2) and (3) for the carrying forward of the tax loss component to the tax year in a loss balance if the meaning of continuity period in that section is modified by replacing the words “the start of the income year that corresponds to the tax year in which a tax loss component is included in the tax loss” with the words “immediately after the company’s last ownership continuity breach occurred that, in the absence of section IB 3, prevents the tax loss component from being carried forward to the tax year in a loss balance”.

Notes
  • Section IB 2B: inserted (with effect on 1 April 2020), on , by section 83(1) (and see section 83(2) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).