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The Treasury Supporting Small and Medium Sized Enterprises During the COVID-19

Crisis Information Release

June 2020

This document has been prepared for release by the Treasury:

https://uniteforrecovery.govt.nz/updates-and-resources/legislation-and-key-documents/proactive-release/

Cabinet Document Details

Title: CAB-20-SUB-0165: Supporting Small and Medium Sized Enterprises During the COVID-19 Crisis

Date: 9 April 2020

Creator: Office of the Minister of Finance

No information has been withheld

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Office of the Minister of Finance

Office of the Minister of Justice

Office of the Minister of Revenue

Office of the Minister for Small Business

Cabinet

Supporting small and medium sized enterprises during the COVID-19 crisis

Proposal

1. This paper proposes options for Cabinet to:

1.1 Approve the implementation of additional business consultancy services through the Regional Business Partners Network (RBPN) and local Chambers of Commerce.

1.2 Provide Inland Revenue with additional administrative flexibility in respect of statutory tax deadlines for taxpayers.

1.3 Approve a change to the tax loss continuity rules that will make it easier for firms to raise new capital without losing their existing tax loses.

1.4 Approve the implementation of a tax loss carry-back scheme that will allow a large number of businesses to access their tax losses as cash.

Executive Summary

2. The COVID-19 crisis has had a significant impact on small and medium-sized enterprises (SMEs). Many SMEs are facing severe cash flow problems as a result of the restrictions on business activity that are necessary to fight the pandemic. SMEs are also affected by the high degree of uncertainty about when normal levels of business activity can resume.

3. In recognition of these challenges, the Government has already introduced a wide range of measures to assist businesses through the crisis. These measures include the wage subsidy scheme, the Business Finance Guarantee, and a package of business tax changes. While these measures apply to businesses beyond just SMEs, they provide substantial benefits to the SME sector.

4. Nevertheless, we believe further action is necessary to boost confidence and help SMEs get through the crisis. In particular, some SMEs are struggling to meet their non-wage fixed costs, but are not in a position to take on additional debt. In the absence of further support from the Government, these SMEs may be forced to close down permanently.

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Business assistance package

5. In light of these challenges, we propose that Cabinet approve a further package of business assistance measures. These measures are designed to be broad in application, but they should have a particularly beneficial impact on SMEs.

6. The proposed business assistance package includes:

6.1 Measures to support commercial tenants and landlords;

6.2 Additional business consultancy services;

6.3 Greater flexibility for taxpayers in respect of statutory tax deadlines;

6.4 Changes to the tax loss continuity rules; and

6.5 A tax loss carry-back scheme.

Background

Economic context

7. The economic outlook has deteriorated significantly as a result of COVID-19. We are expecting New Zealand to suffer its largest economic downturn in living memory. Economic activity is currently forecast to fall nearly 20% in the June quarter. Unemployment is forecast to exceed 10% in the September quarter. These figures are expected to deteriorate significantly if alert level 4 is extended beyond four weeks.

8. Businesses are facing an unprecedented loss of income as a result of the crisis. They face significant uncertainty about when normal levels of business activity will resume. Many have already acted to eliminate discretionary costs, delay investments and reduce labour costs. However, given the scale of the downturn and its deep impact in some sectors, there is likely to be a significant increase in the number of firms without a viable business.

The Government’s response

9. The Government has already acted swiftly in response to the crisis, with its support so far standing at around $20 billion, or over 6% of GDP. The Government is helping support business cash flow and confidence through the wage subsidy scheme, the Business Finance Guarantee, business tax changes, and changes to insolvency laws. The Government has also worked with RBNZ and the financial sector to provide banks with additional lending headroom and support mortgage holders. In addition, the private sector is providing support through measures such as payment plans and contractual adjustments.

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The need for further support for SMEs

10. For smaller firms, the existing support provides some assistance. In particular, broad-based solutions, such as the wage subsidy, have been the most effective way of providing large scale support to the many SMEs that cannot fully utilise some of the other assistance measures.

11. Nevertheless, we believe further action is necessary to boost confidence and help SMEs get through the crisis. In particular, some SMEs are struggling to meet their non-wage fixed costs, but are not in a position to take on additional debt. In the absence of further support from the Government, these SMEs may be forced to close down permanently.

12. Data from the Annual Enterprise Survey demonstrates that non-wage fixed costs are more significant for smaller firms. For firms with fewer than 50 employees, non-wage fixed costs are on average approximately $1.1 million per firm, or 79% of business expenditure. Average interest and rent payments make up approximately 8% of expenditure for these businesses. Other fixed costs include ACC payments, insurance payments, and rates.

Business assistance package

13. There are a number of measures that can be implemented quickly that would provide further assistance to SMEs that are struggling due to the crisis. We recommend that all of the following measures are implemented as soon as is feasible.

Measures to assist with commercial property issues

14. Cabinet Business Committee approved on 8 April a paper from the Minister of Justice (Amendments to the Property Law Act 2007 relating to commercial leases and mortgages) on measures to support commercial tenants and landlords during the crisis. This paper includes proposals to provide eviction protection and restrictions on the exercise of mortgagees’ powers.

15. These measures will provide further assistance to SMEs, in particular those that are struggling due to issues with their premises. Data from the Annual Enterprise Survey suggests that rent costs average $56,000 per year, or 4% of total expenditure, for businesses with fewer than 50 employees.

Additional business consultancy services

16. The current economic conditions are unprecedented, resulting in a level of business uncertainty that is proving extremely difficult for many companies to manage through or plan for. It is, therefore, more important than ever that we provide targeted consultancy services for our businesses to help them understand and access the support that is available to them.

17. In acknowledgement of these difficult times, we propose to increase consultancy services to assist businesses to navigate and manage the economic impacts of COVID-19 over the next 12 months. Consultancy services can provide businesses with support for a range of issues they may be currently facing; but at this point in the

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response phase, the advice will be primarily focused on business continuity planning during times of uncertainty with an emphasis of transitioning from survival to recovery.

18. The Government’s primary objective is to ensure that as many ‘vulnerable-but-viable’ businesses survive the COVID-19 pandemic as possible.

19. Currently, the Government is providing business advisory support through the Regional Business Partner Network (RBPN). Local Chambers of Commerce have also been providing support where needed. However, we know that there has been increased demand for specialist business consultancy services since the crisis began and, therefore, we recognise that the current delivery model may not be appropriate for a scaled-up version of this scheme.

20. It is vital that the New Zealand business community sees value delivered through such an enhanced service. Noting this, a range of models best suited to meet the expectations of businesses, and the objectives of the Government, are currently being considered by the Minister for Small Business, his small business advisors and the Minister for Economic Development.

21. We propose to provide $25 million of investment into significantly increasing the level of targeted business consultancy to support and service to those companies with fewer than 100 employees. This will be divided between:

• Approximately $4 million into strengthening our first point of call helplines

• Approximately $20 million into a much-enhanced level of nationwide business consultancy services primarily geared towards providing business continuity advice and support

• Approximately $1 million into a fund established to provide support for innovative and creative ideas and concepts that will further enhance the offerings provided by this service.

22. Access to the current RBPN scheme is limited to some criteria, which includes a cap on the number of Full Time Employees engaged (i.e. support can only be offered to companies with 50 or fewer FTEs) and the level of funding available to each business. In order to provide broader reach we recommend lifting the current eligibility cap of 50 FTEs to 100 FTEs. This will enable micro, small, and medium-sized business to access support, and reflects the current need to open up support.

Increased administrative flexibility for Inland Revenue

23. We propose an amendment to the Tax Administration Act 1994 to provide flexibility for Inland Revenue to modify timeframes or procedural requirements for taxpayers who are impacted by COVID-19.

24. Currently, providing flexibility in how taxpayers meet their obligations generally requires the making of Orders in Council, which limits the flexibility and speed at which Inland Revenue can respond to taxpayers.

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25. The proposal could be applied for any timeframe or procedural requirement across all tax or social policy obligations set out in the Revenue Acts. Officials also consider this should extend to the provisions of the Unclaimed Money Act 1971 administered by Inland Revenue.

26. The amendment would introduce a discretionary power into the Tax Administration Act 1994 to allow Inland Revenue to provide an extension to due dates, timeframes, or to modify procedural requirements set out in the Revenue Acts. This could include, for example, extending deadlines for filing tax returns and payment of provisional and terminal tax. At this stage, the power will be time-limited for a period of 18 months.

27. This discretion would support businesses impacted by COVID-19. There will be no change to the expectation that taxpayers who can comply with existing requirements and due dates continue to do so. Any changes to requirements will be published on the Inland Revenue website and communicated clearly to taxpayers.

Loosening tax loss continuity rules

28. Loss continuity rules set out the extent to which companies can carry forward tax losses into the following tax year when there is a change of ownership in the company. Currently, New Zealand’s loss continuity rules are among the most stringent in the world. For losses to be carried forward by a company, at least 49% continuity of ownership is required to be maintained from when the loss arose.

29. Businesses, particularly SMEs, may need to raise additional equity investment to remain afloat during the current economic downturn, and to rebuild once the economy begins to recover.

30. On 23 March 2020, Cabinet agreed to release a discussion document that canvassed three options to relax the loss continuity rules [CAB-19-MIN-0491]. We recommend that we implement one of these options now – a ‘same or similar business test’, modelled on the Australian rules. Introducing this test will offer some certainty for businesses carrying their losses forward after a change in ownership. This option is able to be implemented in the near term and manages the risk of loss trading.

31. The test could be in effect from the 2020-21 income year (which has already begun for most taxpayers), allowing companies breaching ownership continuity in response to current events to maintain their losses. It is expected that most stakeholders will support the introduction of a same or similar business test.

32. Consultation will be needed with stakeholders on the legislative design of this policy. The loss continuity rules are designed to maintain the integrity of the tax system by preventing loss trading. It is important to ensure that a same or similar business test reduces impediments to capital raising without facilitating loss trading, which would result in a significant ongoing fiscal risk. It is also important to ensure that the loss continuity rules integrate with the related proposal to introduce a permanent loss carry back regime.

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33. Therefore, we recommend we make an in principle announcement that the same or similar business test will be introduced with application to the 2020-21 income and later years, with legislation following consultation. This will give taxpayers undertaking capital raising a level of certainty to undertake beneficial transactions while giving officials time to work through the detailed design of rules for inclusion in a Bill in the second half of 2020.

Tax loss carry-back

34. We propose introducing a tax loss carry-back mechanism, with a temporary mechanism introduced for this year, followed by a more permanent mechanism following consultation later in the year.

35. A loss carry back mechanism enables a firm to offset a tax loss in a particular year against a profit in a previous year, and therefore receive a refund of tax paid in the previous profitable year. The proposed mechanism will provide cash to firms that are, or anticipate being, in loss owing to COVID-19.

36. Because there is an immediate need to address the current situation facing businesses, we propose introducing a temporary one-year tax loss carry-back mechanism now. This will enable firms to estimate the loss they expect to make in their current year and apply that to any profit they make in the previous year. For most taxpayers this means losses incurred in the 2020-21 year can be carried back to 2019-20.1 This will mean they will receive a refund for some or all of the tax they have already paid – the amount will be dependent on the amount of profit earned in the earlier year and the anticipated loss in the later year.

37. In order to effect this proposal, we are seeking approval for a temporary loss carry back scheme with the parameters as outlined in the appendix.

38. To maintain the integrity of this proposal, we propose that use-of-money interest (UOMI) should apply when taxpayers overestimate their losses for the current year and so over-claim refunds. There is a risk this is seen as inconsistent with the broader remission policy for UOMI for taxpayers that do not pay their tax on time. There is a further risk that applying UOMI discourages taxpayers from utilising this option, because of the possibility of estimation errors. However, it is important that UOMI continues to apply to ensure that taxpayers take care in claiming refunds under this proposal. Without this key part of the policy, the operation, effect and fiscal cost of the policy would be very different from that described in this paper. Specifically, there is a risk that an excessive amount of company tax paid in the 2019-20 income year could potentially be refunded with no incentive to pay it back until UOMI was reapplied at a later date (for context, company tax in the fiscal year ended 30 June 2019 was $14.9 billion).

39. We also propose that tax loss carry back ultimately become a permanent feature of our tax system. It is a substantial measure that will enhance our tax system by making it fairer for companies in loss. However, introducing a permanent solution is relatively complex and will require careful design to ensure the right balance

1 However, some taxpayers may have also made a loss in 2019-20. In this case they could carry the 2019-20 loss back to 2018-19. The appendix has more detail on this.

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between workability and integrity. Policy, and consultation, will not be completed until mid-late 2020. We anticipate introducing legislation that will provide a permanent approach to tax loss carry back and loss continuity towards the end of 2020.

40. Tax loss carry back is a complement to the loss continuity measure. Other countries have introduced this policy in the current circumstances. It is an effective measure because it targets assistance to firms who need it – those anticipating a loss, while not affecting those who remain in profit. The combination of tax loss carry-back and carry forward can pose integrity concerns that will need to be managed in the detailed policy design.

41. The permanent loss carry-back measure will require declaration of losses – firms would be required to have completed a loss-making year to know the amount of loss precisely before taking advantage of the policy. Accordingly, the integrity risks around the permanent policy will be lower.

42. We are also seeking a delegation to the Ministers of Finance and Revenue to agree further details of the policy as required for clarity or integrity reasons.

43. These changes will require amendments to the Income Tax Act 2007 and the Tax Administration Act 1994. We are waiting for advice from officials as to the best legislative vehicle.

44. We are still deciding when to announce the tax loss carry back policy. We are mindful that, due to Release 4 of Inland Revenue’s Business Transformation programme, Inland Revenue is currently shutdown to process the next release of the new system and will be unable to answer taxpayer queries until they open on Thursday (16 April). In addition, it will take time to build the capability of front line staff to respond consistently to queries.

45. We are aware of the cumulative effect of all the changes Inland Revenue is being required to deliver in a short timeframe. These coincide with a number of business-as-usual measures that will get money into the economy such as the 2020 automatic provision of tax refunds. Inevitably, this will have an impact on customer experience.

Options for further support for businesses

46. We are exploring options for further support for businesses as we continue to manage COVID-19. It is important to coordinate these with decisions on the future of the wage subsidy scheme and any other income support measures. Options include low-interest Crown or Crown-backed loans2, targeted grants for particular businesses or sectors or directed towards particular costs, and more general support. We will report back to CVD or Cabinet on these options in the coming days.

2 This would require exercise of powers under the Public Finance Act to give a loan (s 65L) or a guarantee or indemnity (s 65ZD) provided Ministers are satisfied it is necessary or expedient in the public interest to do so.

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Financial Implications


47. These measures will have no fiscal implications for the Crown.


48. The cost of increasing business consultancy services will be $25 million in 2019-20.


49. The fiscal cost of this discretionary power is unclear because it depends how the discretion is used. Components of the measures could create a fiscal risk to the Crown – particularly extending filing and payment dates. However, it is expected that the fiscal risk is no greater than without the administrative measures, as without them, taxpayers would otherwise not meet deadlines. The administrative powers given to the Commissioner of Inland Revenue are to be applied on a discretionary basis and not intended to be used across the board.


50. Introducing a ‘same or similar business’ test is estimated to result in $60 million foregone revenue per annum. This is an estimate only and is difficult to estimate precisely due to the extent of economic downturn associated with COVID-19 is unknown.

Tax loss carry-back scheme

51. Preliminary estimates by officials are that this policy could lead to tax refunds and reduced tax bills of approximately $1.2 billion in 2019-20 and $1.9 billion in 2020-21, with firms paying more tax in subsequent years as firms have less tax losses.

52. Overall the net fiscal impact is estimated at a net cost of $1.6 billion across the current forecast period. This is primarily a timing cost and the majority of this $1.6 billion will be recouped through higher tax paid outside of the forecast period.

53. There is a high degree of uncertainty with these estimates. The extent of the economic downturn associated with COVID-19 is unknown and the estimates rely on assumptions on the degree of tax losses experienced by firms and their long-term profitability. The cost of the policy also does not take into account the benefit of enabling viable businesses to survive the downturn and therefore provide a platform for economic activity when we enter the recovery phase.

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Legislative Implications

Measures to help with commercial property issues

54. These measures will require amendments to the Property Law Act.


55. There are no legislative implications for this measure.


56. This policy requires amendments to the Tax Administration Act 1994. We recommend that an amendment be included in an omnibus Bill addressing a range of COVID-19-related measures.


57. This policy requires amendments to the Income Tax Act 2007 and the Tax Administration Act 1994. We recommend that this measure be included in a Tax Bill in late 2020 following consultation.


58. This policy will require amendments to the Income Tax Act 2007 and the Tax Administration Act 1994. We seek approval for delegated authority to determine the Bill in which the amendments to give effect to the temporary measure will be included.

59. We recommend the permanent measure be included in a Tax Bill in late 2020 following consultation.

Impact Analysis

60. A Regulatory Impact Analysis did not apply because this was a policy proposal directly related to the COVID-19 response.

Consultation

61. The Ministry of Business, Innovation and Employment, the Ministry of Justice, Inland Revenue and the Treasury were involved in the development of this Cabinet paper.

Communications

62. We plan to announce this package as soon as possible, to have maximum impact on reducing small business uncertainty and boosting confidence.

Proactive Release

63. Proactive release will be delayed until such time that the Government can properly consider the impacts of proactive release.

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Recommendations

We recommend that Cabinet:


1. note that Cabinet Business Committee approved on 8 April a paper from the Minister of Justice on measures to support commercial tenants and landlords.


2. agree to increase Government support for business consultancy services (including more capability funding and business support helplines)

3. agree to widen the reach and access to business through the RBP Network by lifting the current eligibility cap of businesses with 50 FTEs to 100 FTEs

4. agree that the Ministers for Small Business and Economic Development have delegated authority to sign off on the final model developed to deliver the service and the use of the funds

5. approve the following change as a result of the decision in recommendation 2-3, with a corresponding impact on the operating balance:

Vote Business, Science and Innovation Minister for Economic Development

2019/20 2020/21 2021/22 2022/23 2023/24 & Outyears

Multi-Category Expenses and Capital Expenditure: Support the Growth and Development of New Zealand Firms, Sectors and Regions MCA

Non-Departmental Output Expense: Services to Support the Growth and Development of New Zealand Businesses

25.000 - - - -

Total Operating 25.000 - - - -

6. agree that the proposed change to the appropriation for 2019/20 above be included in the 2019/20 Supplementary Estimates and that, in the interim, the increase be met from Imprest Supply

7. agree that the expenses incurred under recommendation 5 be charged against the COVID-19 Response and Recovery Fund established as part of Budget 2020

8. agree that any unspent funding for business consultancy services in 2019/20 will be transferred to 2020/21

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9. agree to an amendment to the Tax Administration Act 1994 to provide flexibility to Inland Revenue to modify timeframes or procedural requirements for taxpayers who are impacted by COVID-19

10. agree that the amendment should apply for tax requirements that have arisen from 17 March 2020

11. note that the decision taken in recommendation 8 is unable to be quantified but is not expected to be material

12. agree that the amendment be included in an omnibus Bill addressing a range of COVID-19-related measures

13. invite the Minister of Revenue to issue drafting instructions to Inland Revenue giving effect to recommendations 8 and 9


14. agree to loosen the tax loss continuity rules by accelerating work on a ‘same or similar’ business test modelled on Australia’s rules

15. agree that the measure will be implemented retrospectively to apply to the 2020-21 income year onwards

16. agree to announce the intention to implement the same or similar business test with retrospective effect from the 2020-21 tax year to provide taxpayers with certainty and encourage business recapitalisations

17. note the following change as a result of the decision in recommendation 13-15 above, with a corresponding impact on the operating balance:

$m – increase/(decrease) Vote Revenue Minister of Revenue

2019/20 2020/21 2021/22 2022/23 2023/24 &

Outyears Tax Revenue: - (60.000) (60.000) (60.000) (60.000) Total Operating - 60.000 60.000 60.000 60.000


19. note that the foregone revenue estimates under recommendation 16 are indicative only and could change following consultation and detailed policy design

20. delegate authority to the Minister of Finance and Minister of Revenue to release a consultation document on detailed design

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21. note that the Minister of Finance and Revenue will report to Cabinet seeking agreement to legislation changes following consultation


22. agree to a one-year loss carry-back, allowing net taxable losses incurred in the taxpayer’s 2019-20 or 2020-21 income year, to be carried back and offset against taxable income in their previous income year

23. agree that for losses carried back to a taxpayer’s previous income year, a refund of tax may be provided before the end of the taxpayer’s current income year by allowing a taxpayer to re-estimate provisional tax for the previous income year

24. agree to the following consequential amendments:

24.1 the deadline for re-estimating provisional tax for the 2018-19 and 2019-20 income years will be any time before the tax return is filed

24.2 if the estimated provisional tax is too low because the estimated loss carry-back is too high, standard underpayment use-of-money interest will be charged until the underpayment is repaid

24.3 if a taxpayer carries back a loss and claims a refund of provisional tax, but does not subsequently file the return for the year of the loss on time, the amount of the refund claimed must be repaid (along with use of money interest) on or before the filing date for that return

24.4 a loss carry-back is allowed for a company only if there has been at least 49% shareholder continuity from the beginning of the carry-back year to the end of the loss year

24.5 if a loss company is a member of a group of companies, its loss can be carried back to the profit year and offset against the income of those other group companies only if all of the companies in the group are 66% or more commonly owned from the beginning of the year of profit to the end of the year of loss

25. delegate to the Minister of Finance and Minister of Revenue the authority to make decisions on the final design of the regime to incorporate into the legislation and the Bill in which to include the amendments

26. note the following changes as a result of the decision in recommendation 21-23 above, with a corresponding impact on the operating balance and net core Crown debt: $m – increase/(decrease) Vote Revenue Minister of Revenue

2019/20 2020/21 2021/22 2022/23 2023/24 &

Outyears Tax Revenue: (1,200.000) (1,900.000) 1,000.000 300.000 200.000 Total Operating 1,200.000 1,900.000 (1,000.000) (300.000) (200.000)

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28. agree the Government will consider the design of a long-term loss carry-back regime after this regime has been enacted

Authorised for lodgement

Hon Grant Robertson Hon Andrew Little Hon Stuart Nash Minister of Finance Minister of Justice Minister of Revenue

Minister for Small Business

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Appendix:

Design features of the loss carry-back scheme

1. We are recommending that Cabinet agree to having a loss carry-back regime in two phases:

1.1 An initial phase covering the 2019-20 to 2020-21 income years; and

1.2 A longer-term phase for a permanent regime.

2. The initial phase is intended to provide fast cash flow relief for businesses in loss during the period affected by COVID-19. This will enable tax refunds with respect to profit years to be paid before the loss year has finished. Such fast refunds are not normally provided in loss carry-backs. The initial loss carry-back will provide for a one-year carry-back.

3. The longer-term regime may be more traditional (which would not allow the refund to be paid before the loss has been established) and may include more integrity measures to cover some technical risks. The longer-term regime may provide for a one-year or two-year loss carry-back.

4. The key points for the operation of the loss carry-back are:

4.1 Losses from the 2019-20 year may be carried back to the 2018-19 year

4.2 Losses from the 2020-21 year may be carried back to the 2019-20 year

5. Almost all types of taxpayers will be eligible to carry back losses (companies, trusts, and individuals). Individuals operating businesses through partnerships, limited partnerships, and look-through companies will be able to benefit.

6. Multi-rate Portfolio Investment Entities (PIEs) (most unit trusts and KiwiSaver) may not carry back losses. Multi-rate PIEs (including KiwiSaver) have tax cash-out for losses so already benefit from immediate tax relief for losses.

Claiming a refund from a loss carry-back

7. The primary method for claiming a refund for a loss carry-back will be by re-estimating provisional tax. The deadline for re-estimating provisional tax will be extended from the final instalment date until the date the tax return is filed.

8. If a company for a profit year (say 2019-20) expects to have a loss carry-back deduction from estimating a loss in the next year (including during the next year, any time before the profit year tax return is filed), they may re-estimate their provisional tax by taking into account their estimated loss carry-back deduction. Provisional tax already paid may then be refunded.

9. If the tax return for the profit year has already been filed, the taxpayer may contact Inland Revenue and request a reassessment and refund due to the loss carry-back.

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Limitations and integrity measures

10. For a company to obtain a refund of provisional tax, it must have a sufficient imputation credit at the time (a standard rule for refunds).

11. If the taxpayer owes a debt on other tax types, Inland Revenue may apply some of the refund to satisfy tax debts (standard treatment).

12. If the loss carry-back is overestimated, resulting in tax to be paid later, standard late payment use-of-money interest must apply.

13. If a profit company has had tax refunded on the basis of an expected loss carry-back, and the tax return for the loss year is not filed on time (to document the loss), Inland Revenue must require the refund to be repaid and charge use-of-money interest.

14. If a company has had an ownership change of more than 49% since the beginning of the profit year, the loss carry-back would not be available. This is to prevent the use of losses to eliminate tax on income that was not connected with the loss-making business when it was earned.

15. If a loss company is a member of a group of companies, its loss can be carried back to the profit year and offset against the income of those other group companies. This requires that all of the companies in the group are 66% or more commonly owned from the beginning of the year of profit to the end of the year of loss.

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