Section OA 8 — Income Tax Act 2007: Shareholder continuity requirements for memorandum accounts

OA 8 Shareholder continuity requirements for memorandum accounts When this section applies (1) This section applies when a company or a consolidated group maintains a memorandum account. Shareholder continuity requirement (2) An amount that is a credit in the account may be carried forward from a credit date to a later time only if the company or consolidated group that has the credit maintains a 66% continuity of shareholding under subsection (7) from the credit date to the later time. Subsections (3B) to (5) override this subsection. Continuity (3) A credit is treated as continuing to exist to the extent to which it is not reduced by an earlier or later debit arising in the account. Exclusions: qualifying companies (3B) Subsection (2) does not apply to a qualifying company. But, if section HA 11(1) (When requirements no longer met) applies to the company,— (a) an adjustment must be made under section HA 18 (Treatment of dividends when qualifying company status ends) to the company's imputation credit account and FDP account, as applicable; and (b) the shareholder continuity requirements apply to the company from the day on which the status as a qualifying company ends. Exclusion: ASC accounts (4) Subsection (2) does not apply to a person who maintains an ASC account. Modification: CTR accounts [Repealed] (5) [Repealed] When continuity lost (6) For a memorandum account and for a company or consolidated group that maintains the account when the continuity of shareholding required by subsection (7) is lost, a debit arises under the relevant section in each subpart only to the extent to which an unused amount of credit remains in the memorandum account. The relevant sections are— (a) section OB 41 (ICA debit for loss of shareholder continuity): (b) section OC 24 (FDPA debit for loss of shareholder continuity): (c) [Repealed] (d) section OK 15 (MACA debit for loss of shareholder continuity): (e) section OP 42 (Consolidated ICA debit for loss of shareholder continuity): (f) section OP 73 (Consolidated FDPA debit for loss of shareholder continuity). (g) [Repealed] Shareholder continuity requirement (7) The shareholder continuity requirement is that, while some or all of the credit still exists, a group of persons must continue to hold— (a) aggregate minimum voting interests in a company or consolidated group of at least 66%; and (b) if a market value circumstance exists for a company or, in the case of a consolidated group, a group company, aggregate minimum market value interests in the company or group of at least 66%. Modifications (8) The following rules apply for the purposes of subsection (7): (a) the minimum interest referred to in subsection (7)(a) or (b) of a person must be counted if their interests change after the credit arises; and (b) a credit retains its separate character and is not treated as part of a credit referred to in section OA 7 in a later tax year; and (c) the amount by which a credit is reduced by an earlier or later debit is found by— (i) treating debits as reducing credits in the order in which credits arise; and (ii) counting an amount of a debit only once in the reduction of some or all of a credit; and (iii) applying any relevant terminating modifications set out in section OZ 4 (Terminating modifications to debits for loss of shareholder continuity) for a credit arising before 1 April 1992. Defined in this Act: amount , ASC account , branch equivalent tax account , company , consolidated group , FDP account , group of persons , imputation credit account , Maori authority credit account , market value circumstance , market value interest , memorandum account , minimum market value interest , minimum voting interest , shareholder , tax year , voting interest , Compare: 2004 No 35 ss ME 5(3) , ME 12(1)(h) , ME 13(2), (4) , MF 4(5) , MF 8(4) , MG 15(1) , MI 5(3)–(7) , MI 18(1)(e), (3), (4) , MK 5(3), (4) Section OA 8(2): amended (with effect on 1 April 2008), on 6 October 2009, by section 376(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section OA 8(3B) heading: inserted (with effect on 1 April 2008), on 6 October 2009, by section 376(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section OA 8(3B): inserted (with effect on 1 April 2008), on 6 October 2009, by section 376(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section OA 8(4) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 376(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section OA 8(4): substituted (with effect on 1 April 2008), on 6 October 2009, by section 376(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section OA 8(5) heading: repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, pursuant to section 85(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section OA 8(5): repealed (with effect on 1 July 2011 and applying for income years beginning on or after that date), on 7 May 2012, by section 85(1) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section OA 8(6)(c): repealed, on 1 July 2012 (applying for income years beginning on or after that date), by section 85(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section OA 8(6)(g): repealed, on 1 July 2012 (applying for income years beginning on or after that date), by section 85(2) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section OA 8 list of defined terms CTR account : repealed (with effect on 1 July 2011), on 7 May 2012, by section 85(3) of the Taxation (International Investment and Remedial Matters) Act 2012 (2012 No 34). Section OA 8 list of defined terms policyholder credit account : repealed (with effect on 1 April 2008), on 6 October 2009, by section 376(4) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).