SolvedFPC30040 | Film Production Companies: Losses: Terminal losses
From HM Revenue & Customs · Film Production Company Manual
The film tax regime includes rules which modify the normal loss relief rules for film production companies (FPCs). These modifications include an additional way in which to use a terminal loss of an FPC’s trade.
This applies when:
an FPC carries on a trade in relation to a film that qualifies for Film Tax Relief (FTR) and
that trade ceases.
Normally when a company ceases a trade, any losses incurred or brought forward to the terminal period that cannot be set against other profits of the terminal or previous periods, or surrendered as group relief, are stranded. This is because the rules in CTA10/S45 and S45B only allow the residual losses to be carried forward against profits of the same trade, and only as long as the company continues to carry on the same trade.
In order to preserve these losses for FPCs, and so deliver the value of the incentive that has already been earned, the FPC can elect to pass these losses on:
to another trade in relation to a FTR-qualifying film that it is carrying on at the time of the cessation, or
to another trade in relation to a qualifying film that another group company is carrying on at the time of the cessation.
The loss is carried forward under CTA10/S45 or S45B against profits of that other trade.
The loss restriction rules that apply from 1 April 2017 do not apply to terminal losses carried forward under S45 or S45B of CTA 2010.
A company is in the same group for these purposes if it is in the same group for the purposes of group relief (CTA10/Part 5/Chapter 4).
These ‘surrendered’ losses are treated as losses brought forward to be set against profits of its FTR-qualifying trade for the accounting period following that in which (or at the end of which) the cessation takes place.