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HMRC internal manual

Film Production Company Manual

From
HM Revenue & Customs
Updated
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Film Production Companies: Losses: Completion and later periods

CTA09/S1210

The film tax regime includes rules which modify the normal loss relief rules for film production companies (FPCs).

Losses brought forward treated as losses of current period

For:

  • the accounting period in which the film is completed (or production is abandoned) and any subsequent period
  • so much of any losses brought forward from earlier periods (for which loss relief was limited to carry forward only (FPC30020)) that
  • are not attributable to Film Tax Relief (FTR)
  • are deemed to be losses of the period to which they are brought forward.

Utilising losses (actual or deemed) of current period

Having treated these non-FTR related brought forward losses as losses of the completion (or later) period, the trading loss of the period is then available to:

  • set off against other profits of the same period, or an earlier period under ICTA88/s393A, or
  • surrender as group relief

but only to the extent that the losses are not attributable to FTR.

Where a loss that is not attributable to FTR is brought forward into the completion period under section ICTA88/S393(1) it first reduces any profit from the film production activity.

Any surplus (once the profit is reduced to nil) is then treated as a loss of the completion period for the purposes of loss relief. It is available to set off sideways or carry back under section ICTA88/S393A or to surrender as group relief.

Losses brought forward do not increase surrenderable losses

Any losses brought forward do not augment a trade loss of the later year for the purposes of a surrender for Film Tax Credit (FPC55100).

Treatment of FTR losses brought forward

Where a loss brought forward into the completion period under section ICTA88/S393(1) is attributable to FTR it is only available to be set against profits of the same trade in the completion accounting period and to be carried forward against profits of the same trade in a subsequent accounting period for as long as the trade continues.

So any amount of the loss not attributable to FTR that is not used in the completion accounting period is carried forward again to the next accounting period where, once again, it reduces any profit from the film production activity and any surplus, is treated as a loss of that accounting period for the purposes of loss relief.

Order of set off

This ‘refreshing’ of the loss for loss relief purposes continues until the production period loss not attributable to FTR exhausted or for as long as the trade continues. Because of this ‘refreshing’ it is usually advantageous to a company to treat a loss that is not attributable to FTR and that is carried forward into a completion period as the last part of a loss to be utilised.