Losses: completion period
S1217MB Corporation Tax Act 2009 (CTA 2009)
The rules in Part 15C CTA 2009 modify the normal rules for relieving corporate trading losses.
The completion period is the accounting period in which the Theatrical Production Company (TPC) ceases to carry on the separate theatrical trade.
Prior to the completion period, if a loss is made in the separate theatrical trade the TPC can only surrender the loss for Theatre Tax Credit, where applicable, or carry it forward to set against future profits of the same trade.
Losses of the completion period
The restriction on the use of losses applies until the accounting period in which the separate theatrical trade ceases.
Losses are then treated differently depending on whether they are:
- losses not attributable to Theatre Tax Relief (TTR), or
- losses attributable to TTR.
This divides the losses into two distinct elements.
Losses of the completion period that are incurred from 1 April 2017 are subject to the loss restriction rules in Part 7A CTA2010. This limits 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 Three sets of guidance have been published in draft: tranche 1, tranche 2 and draft guidance on commencement provisions.
Loss not attributable to Theatre Tax Relief
Any loss not attributable to TTR that has been carried forward to the completion period under s45 or 45B of CTA2010, is treated as if it were a loss made during the completion period for these purposes. Losses of the completion period which are not attributable to TTR can be:
- offset against total taxable profits of the Theatre Production Company in the completion period, or previous accounting periods so far as they fall (wholly or partly) within the period of 12 months ending immediately before the completion period begins (s37 CTA2010), or
- surrendered as group relief (Part 5 CTA2010).
Any remaining loss not attributable to TTR may only be relieved under the special terminal losses rules (TTR30050).
A loss not attributable to TTR includes all the expenditure of the separate theatrical trade not including the enhancement for TTR. This means non-enhanceable expenditure and enhanceable core expenditure, not including the enhancement.
Losses not attributable to TTR are calculated by removing the element of losses attributable to TTR.
Loss attributable to Theatre Tax Relief
Subject to the special terminal losses rules (TTR30050), any loss attributable to Theatre Tax Relief (TTR) carried forward to the completion period and not surrendered for Theatre Tax Credit (TTC) may only be used against profits of the same theatrical trade made in the completion period.
Any loss attributable to TTR that is incurred in the completion period and not surrendered for TTC may only be relieved under the special terminal losses rules (TTR30050).
The amount of a loss attributable to TTR is the loss that has arisen from the enhancement element over and above the enhanceable expenditure. This means the enhancement not including both the non-enhanceable expenditure and enhanceable core expenditure.
Losses attributable to TTR are calculated 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 loss attributable to TTR will be the actual loss in the period.