Losses: losses surrendered for payable tax credit
S1216CI(3) Corporation Tax Act 2009 (CTA 2009)
Where a company makes a claim for Television Tax Credit (TTC) it surrenders a part of its surrenderable loss for the credit. The loss surrendered cannot be utilised in any other way.
A Television Production Company (TPC) produces Animation 1 which qualifies for Television Tax Relief (TTR). The company draws up accounts to 31 December.
The separate trade for the purposes Part 15A CTA 2009 commences on 3 July 2013 and the programme is completed on 10 February 2014. The accounting periods are therefore:
- 3 July to 31 December 2013
- Year ended 31 December 2014
- Year ended 31 December 2015
The computations show:
|Period ended 31 December 2013||£|
|Income from the programme||100,000|
|Costs of the animation||(850,000)|
|Television tax relief - additional deduction||(400,000)|
|Profit/(loss) on programme||(1,150,000)|
|Other income - non-trade loan relationship||10,000|
The computation shows a trading loss of £1,150,000. The TPC chooses to surrender part of this trading loss for TTC.
The amount of surrenderable loss (APC55100) is the lesser of:
- the amount of trading loss for the pe55100) is the lesser of:ilised in any other way.its surrenderable loss for the credit. Thiriod of £1,150,000, and
- the available qualifying expenditure of £400,000.
The maximum surrenderable loss is therefore £400,000 and this is surrendered for TTC of £100,000.
This leaves a loss of £750,000 which can only be carried forward. As this is a production accounting period, this 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||£|
|Income from the programme||100,000|
|Costs of the animation||(150,000)|
|Television tax relief - additional deduction||(100,000)|
|Profit/(loss) on programme||(150,000)|
|Other income - non-trade loan relationship||20,000|
The computation shows a trading profit of £150,000. This is the completion period in respect of the animation trade.
The brought forward loss of £750,000
- nil is attributable to TTR, and
- £750,000 is not attributable to TTR
As this is a completion period, the company can utilise the profits not attributable to TTR against other profits and carry them back to the previous period. They therefore utilise losses as follows:
|Set against other profits of the same accounting period||£20,000|
|Carried back against profits of the previous period||£10,000|
|Surrendered as group relief||nil|
This is the maximum amount that can be relieved. This leaves the company with nil total taxable profits in both periods.
The company has unutilised losses brought forward of £720,000.
The current year losses may be surrendered for TTC. The maximum amount of surrenderable loss is the lesser of:
- £870,000 being the amount of the trading loss for the period of £150,000 plus the relevant unused loss of £720,000, and
- the available qualifying expenditure of £100,000.
The maximum surrenderable loss is therefore £100,000. This produces TTC of £25,000 and leaves a trading loss for this accounting period of £50,000.
The total trading loss carried forward is therefore £770,000.
The following table shows how the losses are used in the various accounting periods:
|APE 31/12/13||APE 31/12/14|
|Production period loss||400,000||750,000|
|Losses surrendered for TTC||(400,000)|
|Losses carried forward||750,000|
|Losses brought forward||750,000|
|Completion period losses||100,000||50,000|
|Loss surrendered for TTR||(100,000)|
|Set off against NTLR||(20,000)|
|Carried back against NTLR of previous period||(10,000)|
|Losses brought forward||720,000||50,000|