Taxation: separate trade - cessation
Where a company is a Television Production Company (TPC) (APC10110) for the purposes of Part 15A Corporation Tax Act 2009, the production of each animation (APC10100) is treated as a separate trade. This isolates the development of each animation on an individual basis for the purpose of calculating profits and losses.
The point at which this trade starts is determined by special rules (APC20100) but, once set up, the normal rules apply for when a trade ceases. Guidance at BIM80565 onwards sets out the normal cessation rules.
The question of whether any trade has ceased is a matter of fact. A TPC’s trade may include:
- exploiting a programme (see APC20210)
- selling a programme, and all the rights in it, for others to exploit, or
- making animations under contract to another person such that it never holds any of the rights.
In cases where a programme, and all the rights in it, is sold outright, it will be easy to determine the point where the trade ceases.
The point of cessation may be less clear where some or all of the rights in the programme are retained by the TPC. Broadly speaking, a trade ceases when the TPC no longer actively exploits, nor has any expectation that income will arise from, the animation rights.
Where a TPC retains rights to enjoy future income from the animation (possibly coupled to an obligation to make further deferred payments out of those receipts) that income is regarded as deriving from the ongoing trade of television production relating to that trade. This is the case even where receipts follow a ‘stagnant’ period during which no income was received. The receipts will not relate to any new trade, nor will they be treated as non-trading (investment) income.
If a trade ceases, the TPC may be able to use losses under Television Tax Relief (TTR) by using the special terminal loss rule, see APC30040.