A client company was registered in April 2006 and has had rental income since its incorporation. A LAQC election application was submitted to the IRD which was misplaced by them. The tax returns are still not filed for financial years 2007 and 2008. 

Will the IRD allow losses to be attributed for 2007?

If the IRD does not allow attribution for 2007, can we file a fresh LAQC application before 31 March 2009 and claim losses for 2008.

A LAQC election made for an existing company (i.e. not a newly registered company) applies from the start of the financial year following the date the election is filed with the IRD. For example if you made a LAQC election on 28 January 2009 it would not apply until 1 April 2009 i.e. the 31 March 2010 financial year. 

In comparison an election for LAQC status for a newly registered company applies from its commencement date. For a newly incorporated company, the company has until the last date for filing its first income tax return to make the LAQC election effective from its commencement date.

If the IRD has misplaced the original application form and you can prove it i.e. you have copies of the letter and application form sent to the IRD, you may have a good argument to have the LAQC status approved for the 2007 financial year on the basis the company was newly formed when you applied for the LAQC status and therefore this would have applied from the 2007 financial year. You will need to call IRD in this regard and state your case. Our experience however is the IRD take a fairly hard line in this regard.

Note that if the IRD does not allow for attribution for the 2007 year, you will have to file a new LAQC application before the 31 March 2009 to receive LAQC status for the 31 March 2010 financial year.

In addition if the IRD does not accept the earlier application then any losses incurred up until the date the new election becomes effective e.g. 1 April 2009 will be forfeited on entry into the regime.

It is important to follow-up LAQC election notices with the IRD if you have not received any correspondence within a couple of weeks.