Recent amendments to the Qualifying Company (QC) regime have resulted in the termination of LAQCs. Time is now running out for QCs that want to transition to a LTC, a sole tradership or partnership in the income year beginning 1 April 2011.
If companies that were LAQCs at 31 March 2011 do nothing, they will automatically become QC’s from 1 April 2011. This means any losses incurred by the QC can no longer be passed out to shareholders.
The Government has however introduced some concessionary transitional measures whereby a QC can restructure into another entity or elect to become a “Look Through Company” (LTC). Income and expenses of a LTC are attributed to the shareholders of the LTC.
A QC can transition to a LTC, a sole tradership or a partnership without any tax cost in either the first or second income year starting on or after 1 April 2011 (the “transitional year”). In order for a company to do so, the IRD must receive the relevant election (IR 862 for LTCs or IR891 for sole traderships, partnerships/limited partnerships) within six months of the start of the transitional year.
Therefore, time is now running out for QCs that want to transition to a LTC, a sole tradership or partnership in the income year beginning 1 April 2011.
Remember, these elections must be filed with the IRD by 30 September 2011. Please contact your Hayes Knight advisor ASAP if you had a LAQC and require any further information on what this means for you.
Alternatively please contact our Tax Team:
T + 64 9 414 5444
Senior Tax Manager
T +64 9 414 5444