Recoupment of tax losses

PPP arrangements generally incur income tax losses in the early years, due to inter alia, interest deductions, initial costs and accelerated depreciation deductions. Therefore, project participants are likely to use structures which allow the tax losses to be carried forward and used. Tax losses are quarantined in both a trust and a company, yet losses can flow to partners in a partnership. Furthermore, companies and trusts may lose the ability to carry forward and use any tax losses where there is a change in the majority underlying ownership of that entity.