APC30060 - Losses: example - programme eligible for TTR
A Television Production Company (TPC) is set up to produce a single series of an animation that qualifies for Television Tax Relief (TTR).
The separate trade for TTR for the purposes of Part 15A Corporation Tax Act 2009 commences on 3 July 2013 and the programme is completed on 10 February 2014. The company draws up accounts to 31 December. 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) |
| 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 not to surrender any part of this trading loss for the Television Tax Credit (TTC). In reality, a TPC would be unlikely to make this choice, which is intended to illustrate the computational principle.
As this is a production accounting period, the 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) |
| Loss on programme | (150,000) |
| Other income - non-trade loan relationship | 20,000 |
The computation shows a trading loss of £150,000.
This is the completion period. The trading loss brought forward that is not attributable to TTR can be treated as a loss of the accounting period for the purposes of loss relief. The amount carried forward into the completion period that is not attributable to TTR is £750,000.
The £50,000 loss of this accounting period that is not attributable to TTR is therefore enhanced by the trading loss brought forward from the earlier period.
The losses available to use in this period are £800,000.
The loss not attributable to TTR treated as incurred in the period may be:
- set against other profits of the same accounting period, the non-trade loan relationship income,
- carried back against profits of the accounting period ended 31 December 2013, or
- surrendered as group relief if available.
The company sets off the losses against the non-trade loan relationship income of the current and previous period. This means that there are no taxable profits in the period ended 31 December 2013 and the period ended 31 December 2014.
The losses not attributable to TTR carried forward are £770,000 (£800,000 - £30,000).
However, in addition to this amount there is an amount of losses attributable to TTR of £500,000 being £400,000 from 2013 and £100,000 from 2014. This gives a total of £1,270,000 of losses available to be carried forward against future profits of the trade.
| Period ended 31 December 2015 | Amount £ |
|---|---|
| Income from the programme | 1,000,000 |
| Costs of the animation | (100,000) |
| Profit/loss on programme | 900,000 |
| Other income - non-trade loan relationship | 50,000 |
The computation for this period shows a trading profit of £900,000. The losses brought forward of £1,270,000 are utilised against this profit first.
The losses attributable are used in priority over those not attributable to TTR. This is because there is no stipulated order and the losses not attributable to TTR can be utilised more readily.
This means that the £500,000 of losses attributable to TTR are used in full. This reduces the trading profit to £400,000. Losses brought forward must be used against these profits in the first instance.
The remaining loss not attributable to TTR of £370,000 may be:
- set against other profits of the same accounting period, the non-trade loan relationship income,
- carried back against profits of the accounting period ended 31 December 2013, or
- surrendered as group relief if available.
The TPC utilises them against the non-trade loan relationship profit of £50,000, reducing the total taxable profits to nil.
The TPC has trading losses of £320,000 carried forward at 31 December 2015. These are losses not attributable to TTR and may be set against other profits or surrendered to other group companies in the next trading period.
The following table shows how the losses are used in the various accounting periods:
| - | TTR £ (losses from APE 31/12/2013) | non-TTR £ (losses from APE 31/12/2013) | TTR £ (losses from APE 31/12/2014) | non-TTR £ (losses from APE 31/12/2014) |
|---|---|---|---|---|
| APE 31/12/2013 | - | - | - | - |
| Production period loss | 400,000 | 750,000 | - | - |
| Losses carried forward into completion period | 400,000 | 750,000 | - | - |
| APE 31/12/2014 | - | - | - | - |
| Losses brought forward | 400,000 | 750,000 | - | - |
| Completion period loss | - | - | 100,000 | 50,000 |
| Loss utilised against NTLR (CY & PY) | - | - | - | (30,000) |
| Losses carried forward | 400,000 | 750,000 | 100,000 | 20,000 |
| APE 31/12/2015 | TTR £ | non-TTR £ | TTR £ | non-TTR £ |
| Losses brought forward | 400,000 | 750,000 | 100,000 | 20,000 |
| Utilised against profits of the same trade | (400,000) | (380,000) | (100,000) | (20,000) |
| Losses utilised against NTLR (CY) | - | (50,000) | - | - |
| Remaining - available to surrender or carry forward | 0 | 320,000 | 0 | 0 |