APC30100 | Losses: losses surrendered for payable tax credit

From HM Revenue & Customs · Animation Production Company Manual

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 Animation 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	Amount - £
Income from the programme	100,000
Costs of the animation	(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 (APC55100) is the lesser of:

the amount of trading loss for the pe55100) is the lesser of:ilised in any other way.its surrenderable loss for the credit. Thiriod 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	Amount - £
Income from the programme	100,000
Costs of the animation	(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 animation 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:

-	Amount of loss
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
Total	£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:

-	TTR - APE 31/12/2013 - £	non-TTR - APE 31/12/2013 - £	TTR - APE 31/12/2014 - £	non-TTR - APE 31/12/2014 - £
APE 31/12/2013	-	-	-	-
Production period loss	400,000	750,000	-	-
Losses surrendered for TTC	(400,000)	-	-	-
Losses carried forward	0	750,000	-	-
APE 31/12/2014	-	-	-	-
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	0	50,000
APE 31/12/2015	-	-	-	-
Losses brought forward	-	720,000	-	50,000