Unutilised losses, capital allowances and donations

Unutilised losses for a particular YA arises when the company has insufficient or no income from other sources to offset business losses incurred during that YA.

Unutilised capital allowances for a particular YA arises when the capital allowances claimed in that YA cannot be fully utilised due to insufficiency of income or business losses incurred during that YA.

Unutilised donations for a particular YA arises when allowable donations made during the YA is more than the income for that YA.

Can the unutilised losses, capital allowances and donations be carried forward? What are the qualifying conditions?

The unutilised losses can be carried forward to offset against your company's assessable income for the subsequent YAs if it satisfies the qualifying condition.

With effect from YA 2003, your company can also carry forward unutilised donations to subsequent YAs up to a maximum of five years.

The qualifying condition for claiming unutilised losses and donations is:

There must be no substantial change in the shareholders* and their shareholdings as at the relevant dates. (This is known as the shareholding test).

Similarly, the unutilised capital allowances can be carry forward to offset against the assessable income of the subsequent YAs if it satisfies the qualifying conditions.

The qualifying conditions for claiming unutilised capital allowances are:

• There must be no substantial change in the shareholders* and their shareholdings as at the relevant dates;
• There must be no change in the company’s principal activities during the relevant dates.

* Shareholders refer to shareholders of the ultimate holding company (where applicable).

For details and examples on how to determine the relevant dates, please refer to What are the relevant dates?

For details and examples on shareholding test, please refer to How to determine whether there is substantial change in shareholders? 

How to claim for unutilised losses, capital allowances and donations brought forward from previous YA?

If your company satisfies the qualifying conditions, it can claim for the unutilised losses, capital allowances and donations brought forward from the previous YAs.

To claim for unutilised losses, capital allowances and donations brought forward, you must fill in the unutilised amount brought forward from previous YA and the unutilised amount to be carried forward in your Form C. For details, please refer to How to complete Form C.

Your tax computation must show the claim for unutilised losses, capital allowances and donations brought forward and your computation of the unutilised amount to be carried forward for subsequent YAs where applicable.

In claiming the unutilised losses, capital allowances and donations against the current year income, the amounts should be deducted in the following order:

• Unutilised capital allowances* (starting with the capital allowances from the earliest YA)
• Current year capital allowance*
• Unutilised losses from previous years* (starting with the losses from the earliest YA)
• Unutilised donations from previous years (starting with the donations from the earliest YA, subject to a maximum of 5 years before the current year)
• Current year donations

You can refer to the Basic Tax Calculator for help with the preparation of a tax computation and to work out the amount of unutilised losses, capital allowances and donations available for carry forward to future YAs.

The Basic Tax Calculator can also help you to complete the Form C as the relevant line numbers of the Form C are indicated on the template. You can enter the unutilised losses, capital allowances and donations brought forward and carried forward based on the line numbers shown on the template.

What are the relevant dates?

The relevant dates differ for the claim of unutilised capital allowances and unutilised losses / donations.

How to determine whether there is a substantial change in the shareholders?

The steps for determining whether there is substantial change in shareholders are:

• Identify the two relevant dates for comparison purposes
• Identify the common shareholders* that have shareholdings on both relevant dates
• Add up the number of shares held by the common shareholders as at each relevant date and express it as a percentage over the total number of shares as at each relevant date
• If the percentage of shareholding of the common shareholders as at these two relevant dates are 50% or more, there is no substantial change in shareholders and their shareholdings.

What is loss carried back?

Before YA 2006, your company can only carry forward its unutilised losses and capital allowances to offset against its future income (i.e. loss carry forward).

From YA 2006 onwards, your company may elect to carry back its current year unutilised capital allowances and losses (subject to a capping of $100,000) to the immediate YA preceding the current YA.

And as announced in the 2009 Budget, not only has the cap on the aggregate amount to be carried back been temporarily increased from $100,000 to $200,000 for YAs 2009 and 2010, such amounts can even be carried back up to 3 YAs immediately preceding the YA in which the unutilised capital allowances were granted or losses were incurred.

For more details, please refer to loss carry back relief.

What is Group Relief?

Starting from YA 2003, your company can elect to transfer its current year unutilised losses (excluding unutilised Section 14Q deduction that arise in YA 2012 or earlier), capital allowances and donations to its related companies to offset against the income of its related companies. For more details, please refer to Group Relief.

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