Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Animation Production Company Manual

From
HM Revenue & Customs
Updated
, see all updates

Losses: example - programme ineligible for TTR

A Television Production Company (TPC) is set up to produce a single series of an animation that does not qualify for Television Tax Relief (TTR).

The separate trade for the purposes of Part 15A Corporation Tax Act 2009 commences on 3 July 2013 and the programme is completed on 10 February 2014. The company draws up accounts to 31 December. The accounting periods are therefore:

  • 3 July to 31 December 2013
  • Year ended 31 December 2014
  • Year ended 31 December 2015

The computation show:

Period ended 31 December 2013 £
   
Income from the programme 100,000
Costs of the animation (850,000)
Loss on programme (750,000)
Other income - non-trade loan relationship 10,000

 

The computation shows a trading loss of £750,000. As this is a production accounting period, the loss is restricted and cannot be offset against other income. The interest income (the non-trade loan relationship income) is therefore taxable.

 

Period ended 31 December 2014 - completion period £
   
Income from the programme 100,000
Costs of the animation (150,000)
Loss on programme (50,000)
Other income - non-trade loan relationship 20,000

 

The computation shows a trading loss of £50,000.

 

This is the completion period and the trading loss brought forward is not attributable to TTR. It is treated as a loss of the accounting period for the purposes of loss relief. The loss of this accounting period is therefore enhanced by the trading loss brought forward from the earlier period.

The losses available to use in this period are £800,000.

The increased loss may be:

  • set against other profits of the same accounting period, the non-trade loan relationship income,
  • carried back against profits of the accounting period ended 31 December 2013, or
  • surrendered as group relief if available.

Any remaining loss is available to carry forward and will be treated as a loss arising in a future post-completion period.

The company sets off the losses against the non-trade loan relationship income of the current and previous period. This means that there are no taxable profits in the period ended 31 December 2013 and the period ended 31 December 2014.

The losses carried forward are £770,000 (£800,000 - £30,000).

It is advantageous for the company to use the losses against other profits as it extinguishes any tax liability in those periods.

Period ended 31 December 2015 £
   
Income from the programme 1,000,000
Costs of the animation (100,000)
Profit/loss on programme 900,000
Other income - non-trade loan relationship 50,000

 

The computation for this period shows a trading profit of £900,000. The losses brought forward are utilised against this profit first.

 

This means that the trading profits are reduced by £770,000 to £130,000. Combined with the non-trade loan relationship profit the total taxable profit for the period is £180,000.

The TPC has no losses carried forward at 31 December 2015.