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HMRC internal manual

Video Games Development Company Manual

Losses: terminal losses

S1217DC Corporation Tax Act 2009 (CTA 2009)

The rules in Part 15B CTA 2009 modify the normal rules for relieving corporate trading losses. The losses incurred by a video game trade of a Video Games Development Company (VGDC) can only be used against future profits of the same trade prior to completion of the video game.

A VGDC may surrender its losses from a video game trade when that trade ceases. This is in contrast to the normal rules on terminal losses which must be offset against profits of the same trade arising in the three previous years.

The VGDC can elect to pass losses on to another trade that qualifies for Video Games Tax Relief (VGTR). The trade must be carried on at the time of cessation and can be:

  • another trade carried on by the same company, or
  • another trade carried on by a different VGDC in the same group.

A company is in the same group for these purposes if it is in the same group for group relief purposes. See CTM80150.

The losses are treated as losses brought forward to be set against profits of the VGTR-qualifying trade for the accounting period that commences after the cessation.

For example, company A claims terminal loss relief under the rules in Part 15B CTA 2009. It ceases on 31 October 2014. It surrenders losses to company B which is in the same group and has a VGTR trade. Company B has a chargeable accounting period ended 30 April 2015. The losses transferred will be treated as brought forward by company B in the period commencing 1 May 2015.

The new loss provisions from 1 April 2017 will still allow companies to utilise  terminal losses in a similar manner whether they are brought forward under s45 or S45A of CTA 2010