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HMRC internal manual

Film Production Company Manual

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HM Revenue & Customs
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Film Production Companies: Losses: Terminal losses

CTA09/S1211

The film tax regime includes rules which modify the normal loss relief rules for film production companies (FPCs). These modifications include an additional way in which to use a terminal loss of an FPC’s trade.

This applies when:

  • an FPC carries on a trade in relation to a film that qualifies for Film Tax Relief (FTR) and
  • that trade ceases.

Normally when a company ceases a trade, any losses of that trade it can not use in the cessation accounting period (to set against other profits or to surrender as group relief) are stranded. This is because the rules in ICTA88/S393(1) only allow the residual losses to be carried forward against profits of the same trade, and only as long as the company continues to carry on the same trade.

In order to preserve these losses, and so deliver the value of the incentive that has already been earned, the FPC can elect to pass these losses on

  • to another trade in relation to an FTR-qualifying film that it is carrying on at the time of the cessation, or
  • to another trade in relation to a qualifying film that another group company is carrying on at the time of the cessation.

A company is in the same group for these purposes if it is in the same group for the purposes of group relief (ICTA88/Part10/Chapter4).

These ‘surrendered’ losses are treated as losses brought forward to be set against profits of its FTR-qualifying trade for the accounting period following that in which (or at the end of which) the cessation takes place.