Chapter 7: Write–off of government investment
Overview
322.This Chapter restricts losses where there has been a write-off of an amount of government investment in a company.
Section 92: Loss relief to be reduced if government investment is written off
323.This section provides that if an amount of government investment in a company is written off that company’s carry-forward losses are restricted by the amount written off. It is based on section 400(1) and (10) of ICTA.
Section 93: Groups of companies
324.This section sets out the further rules that apply if section 92 applies and the company is a member of a group of companies. It is based on section 400(5) and (10) of ICTA.
325.In these circumstances subsection (2) provides that the restriction may be to the carry-forward losses of any of the group companies provided that the restriction is on a just and reasonable basis. For example, if the government investment had been in a holding company and that company had lent the money to a subsidiary then it would be appropriate to restrict the carry-forward losses of the subsidiary.
Section 94: Cases in which government investment is written off
326.This section sets out the three circumstances which constitute a write-off of government investment. It is based on section 400(7), (8), (9) and (10) of ICTA.
Section 95: Meaning of “carry-forward losses”
327.This section defines the five types of “carry-forward losses”. It is based on section 400(2) to (4) of ICTA.
328.Subsection (2) provides that certain amounts are not to be included in the calculation of “carry-forward losses”. The effect of this is to limit the reduction of loss relief provided for by section 92.
329.Subsection (4) sets out the order in which losses are to be set off against the various “carry-forward losses” set out at subsection (1).
Section 96: Interaction with other tax provisions
330.This section ensures that a company is not prevented from deducting an amount in calculating its profits of a trade simply because an amount of government investment in the company has been written off. It is based on section 400(6) and (9A) of ICTA.
