FPC55100 - Calculation: surrenderable losses and Film Tax Credit
CTA2009/S1201 & 1202
A film production company (FPC) has the option of claiming Film Tax Relief (FTR) as a payable tax credit - a payment direct from HMRC. It can do so in any period in which it has a surrenderable loss.
The company may surrender all or part of its surrenderable loss.
The amount of the surrenderable loss
The calculation of a surrenderable loss was amended by s14 Finance (No 3) Act 2010. This amendment applies to accounting periods ending on or after 9 December 2009 and in relation to those periods is treated as always having had effect.
The surrenderable loss is the lesser of:
- the amount of the company’s available loss for the accounting period; and
- the available qualifying expenditure () for that period (i.e. the lesser of core UK expenditure or 80% of the total core expenditure, less any amount surrendered in previous periods).
The available loss for the period is given by the formula L + RUL where
R is the loss for the period in the separate trade, and
RUL is the amount of any relevant unused loss brought forward. The relevant unused loss is any available loss for previous periods not surrendered under s1202(1) or carried forward under S45 or S45B CTA 2010 and set against profits of the separate film trade.
The amount of available qualifying expenditure is the amount of the additional deduction, less any amount previously surrendered under S1202.
The amount of payable credit
The amount of the payment is the payable credit rate (25%) multiplied by the amount of loss surrendered.
Historic rules
Prior to 9 December 2009, the amount of the surrenderable loss for any accounting period was the lesser of: the amount of the trading loss in the period (taking account of the additional deduction), and the enhanceable expenditure for that period less any amount surrendered in previous periods. RUL was not available and only the loss of the period could be surrendered.
Until 1 April 2015, there was a distinction between large budget and limited budget films. For a large budget film (i.e. a film that was not a limited-budget film ), the rate of enhancement applied to the enhanceable expenditure to generate the additional deduction was 80% (). This meant that the amount of the surrenderable loss could have been greater than the amount of the additional deduction. In such cases, the company could surrender a greater amount of loss than the additional deduction: not only the loss attributable to the additional deduction, but also some ‘ordinary’ loss.