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HMRC internal manual

Television Production Company Manual

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HM Revenue & Customs
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Losses: losses surrendered for payable tax credit

S1216CI(3) Corporation Tax Act 2009 (CTA 2009)

Where a company makes a claim for Television Tax Credit (TTC) it surrenders a part of its surrenderable loss for the credit. The loss surrendered cannot be utilised in any other way.

Example

A Television Production Company (TPC) produces Programme 1 which qualifies for Television Tax Relief (TTR). The company draws up accounts to 31 December.

The separate trade for the purposes Part 15A CTA 2009 commences on 3 July 2013 and the programme is completed on 10 February 2014. The accounting periods are therefore:

  • 3 July to 31 December 2013
  • Year ended 31 December 2014
  • Year ended 31 December 2015

The computations show:

Period ended 31 December 2013 £
   
Income from the programme 100,000
Costs of the programme (850,000)
Television tax relief - additional deduction (400,000)
Profit/(loss) on programme (1,150,000)
Other income - non-trade loan relationship 10,000

 

The computation shows a trading loss of £1,150,000. The TPC chooses to surrender part of this trading loss for TTC.

 

The amount of surrenderable loss (TPC55100) is the lesser of:

  • the amount of trading loss for the period of £1,150,000, and
  • the available qualifying expenditure of £400,000.

The maximum surrenderable loss is therefore £400,000 and this is surrendered for TTC of £100,000.

This leaves a loss of £750,000 which can only be carried forward. As this is a production accounting period, this loss is restricted and cannot be offset against other income. The interest income (the non-trade loan relationship income) is therefore taxable.

Period ended 31 December 2014 £
   
Income from the programme 100,000
Costs of the programme (150,000)
Television tax relief - additional deduction (100,000)
Profit/(loss) on programme (150,000)
Other income - non-trade loan relationship 20,000

 

The computation shows a trading profit of £150,000. This is the completion period in respect of the television programme trade.

 

The brought forward loss of £750,000

  • nil is attributable to TTR, and
  • £750,000 is not attributable to TTR.

As this is a completion period, the company can utilise the profits not attributable to TTR against other profits and carry them back to the previous period. They therefore utilise losses as follows:

Set against other profits of the same accounting period £20,000
   
Carried back against profits of the previous period £10,000
Surrendered as group relief nil
  £30,000

This is the maximum amount that can be relieved. This leaves the company with nil total taxable profits in both periods.

The company has unutilised losses brought forward of £720,000.

The current year losses may be surrendered for TTC. The maximum amount of surrenderable loss is the lesser of:

  • £870,000, being the amount of the trading loss for the period of £150,000 plus the relevant unused loss of £720,000, and
  • the available qualifying expenditure of £100,000.

The maximum surrenderable loss is therefore £100,000. This produces TTC of £25,000 and leaves a trading loss for this accounting period of £50,000.

The total trading loss carried forward is therefore £770,000.

The following table shows how the losses are used in the various accounting periods:

  APE 31/12/13   APE 31/12/14  
         
  TTR      
£ non-TTR
£ TTR
£ non-TTR
£          
  APE 31/12/13        
  Production period loss 400,000 750,000    
  Losses surrendered for TTC (400,000)      
  Losses carried forward   750,000    
  APE 31/12/14        
  Losses brought forward   750,000    
  Completion period losses     100,000 50,000
  Loss surrendered for TTR     (100,000)  
  Set off against NTLR   (20,000)    
  Carried back against NTLR of previous period   (10,000)    
      720,000   50,000
  APE 31/12/15        
  Losses brought forward   720,000   50,000