APC30100 - 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.

Example

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 Amount - £
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 Amount - £
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:

- Amount of loss
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
Total £30,000

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:

- TTR - APE 31/12/2013 - £ non-TTR - APE 31/12/2013 - £ TTR - APE 31/12/2014 - £ non-TTR - APE 31/12/2014 - £
APE 31/12/2013 - - - -
Production period loss 400,000 750,000 - -
Losses surrendered for TTC (400,000) - - -
Losses carried forward 0 750,000 - -
APE 31/12/2014 - - - -
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) - -
- - 720,000 0 50,000
APE 31/12/2015 - - - -
Losses brought forward - 720,000 - 50,000