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HMRC internal manual

Film Production Company Manual

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.
  • for periods from 1 April 2017 new treatment of losses applies 

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.

Reform of Corporation Tax loss relief: as of 1 April 2017, the relief available for trading losses carried forward has changed. A restriction has been introduced, limiting the total amount of relief available for carried-forward losses. In addition, most carried-forward trading losses incurred from 1 April 2017 can be set against total profits, and may be available for surrender as group relief for carried-forward losses. Three sets of guidance have been published in draft: tranche 1, tranche 2 and draft guidance on commencement provisions

 

Calculation of surrenderable losses—S1201

For periods ending on or after 9 December 2009 losses brought forward can augment current year losses for the purposes of calculating the surrenderable loss. The suurenderable loss is given by the formula LR + RUL where

L is the amount of the loss for the period in the separate trade and

RUL is the amount of any unused relevant loss brought forward.

A relevant unused loss brought forward is one which has not been surrendered for a tax credit in previous years and has not been set against profits of the separate film trade under ss45 or 45A of CTA 2010.   

For periods which ending before 9 December 2009 RUL was not available and only the loss of the period could be surrendered

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.

The use of losses not attributable to FTR for periods from 1 April 2017 has changed and these are now subject to the amended rules.