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HMRC internal manual

Television Production Company Manual

From
HM Revenue & Customs
Updated
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Losses: completion and later periods

S1216DB Corporation Tax Act 2009 (CTA 2009)

The rules in Part 15A CTA 2009 modify the normal rules for relieving corporate trading losses. The losses incurred by a television programme trade of a Television Production Company (TPC) are restricted to being surrendered for payable tax credit, where applicable, or used against future profits of the same trade prior to completion of the programme.

Losses of the completion or later period

The restriction to the use of losses applies until the accounting period in which the programme is completed.

Losses are then treated differently depending on whether they are:

  • losses not attributable to Television Tax Relief (TTR), or
  • losses attributable to TTR.

This divides the losses into two distinct elements.

Losses brought forward are treated as losses of the current period

Where losses have been brought forward into the completion period, or any later period, they are treated as having been incurred in that current period.

They also need to be separated into the two elements of losses which are attributable and non-attributable to TTR.

Losses not attributable to TTR

‘Losses not attributable to TTR’ includes all the expenditure of the programme trade not including the enhancement for TTR. This means non-enhanceable expenditure and enhanceable core expenditure not including the enhancement.

The losses not attributable to TTR are calculated by removing the element of losses attributable to TTR.

This element of the loss in the completion, or later, period can be:

  • offset against total taxable profits of the TPC in the current or previous period
  • surrendered to other companies in the group, or
  • carried forward for use against profits of the same trade.

Losses attributable to TTR cannot be relieved in this way.

Losses brought forward that are attributable to TTR

The ‘losses attributable to TTR’ are the losses that have arisen from the enhancement element in addition to the enhanceable expenditure. Losses attributable to TTR do not include non-enhanceable expenditure.

The losses attributable to TTR are given by deducting from the loss for the period what the losses for the period would be in the absence of TTR.

Where there would have been a profit for the period in the absence of TTR, the deduction from actual losses will be nil. Therefore, the losses attributable to TTR will be the actual loss in the period.

Losses attributable to TTR and not surrendered for payable tax credit may only be used against future profits of the same trade.

Where losses are brought forward, losses attributable to TTR must be distinguished from those not attributable to TTR.

Losses brought forward

Losses that are brought forward from an earlier period may increase the surrenderable loss for Television Tax Credit (TTC) purposes provided that the losses are relevant unused losses (see TPC55100).

Order of set-off

Because the losses not attributable to TTR can be utilised more readily, the TPC will want to retain these losses in preference to losses attributable to TTR.

Therefore, where losses are used against future profits or surrendered, it is usually the losses attributable to TTR that are considered to be used first.