CREC043000 - Losses: terminal losses

Section 1179BG CTA 2009 

The normal rules for terminal losses require the losses to be offset against profits of the same trade arising in the three years before the period in which the trade ceases. The losses cannot be transferred to a different trade. 

There are special rules in Part 14A CTA 2009 which apply to terminal losses when a separate production trade ceases. 

A separate production trade may cease while the production company still has unrelieved losses arising in the cessation period or brought forward from previous periods. If the trade had not ceased, they would be available to carry forward under s45A or 45B CTA 2010. 

The production company can elect to transfer those unrelieved losses to a different production trade. That trade can be: 

  • another trade carried on by the same company, or 

  • another trade carried on by a different production company 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 CTM80151. 
 

Conditions for valid transfer of losses 

For the transfer to be valid, the trade which receives the losses: 

  • must have been carried on at the time the first trade ceased, and 

  • must be of the same type as the ceased trade. 

Two trades are of the same type if they both relate to productions which are qualifying productions under the same Chapter of Part 14A CTA 2009. In other words, film and TV programme trades are treated as the same type of trade for terminal loss purposes, while a video game trade can only be the same type of trade as another video game trade. 

This means that: 

  • The terminal loss of a film trade can be transferred to another film trade or a TV programme trade  

  • The terminal loss of a TV programme trade can be transferred to another TV programme trade or a film trade 

  • The terminal loss of a video game trade can only be transferred to another video game trade 

The transferred losses are treated as losses brought forward to be set against profits of the recipient trade only – the losses are treated as though they are carried forward under s45B CTA 2010, which means they cannot be set against other profits of the company. The losses are treated as if they are carried forward into the first accounting period of the recipient trade that begins after the cessation. 

If a company transfers losses to a different company, that other company must make a claim in writing to HMRC for the transfer to have effect. The company which makes the transfer cannot get ordinary terminal loss relief under section 45F CTA 2010 in respect of the losses transferred to the other company. This is to prevent the same losses from being relieved twice. 

Example 1 

Company A produces a video game and has unrelieved losses arising from it. Its trade ceases on 31 October 2024. 

Company B is in the same group and has a separate trade for a video game, which is ongoing on 31 October 2024 when Company A’s trade ceases. Company A agrees to transfer the losses to Company B, and Company B makes a claim to receive them. 

Company B has a chargeable accounting period ending 30 April 2025. The losses transferred will therefore be treated as brought forward by Company B in the period commencing 1 May 2025. 

Company A cannot claim ordinary terminal loss relief for the surrendered losses. 
 

Invalid transfers 

If: 

  • the trade receiving the losses is no longer carried on in the accounting period beginning after the cessation of the trade surrendering the losses, or 

  • the company carrying on the trade receiving the losses is not entitled to an expenditure credit in relation to that trade for the same accounting period as above, or 

  • the group company receiving losses fails to make an election, 

the transfer is not valid and the surrender of losses is treated as though it had not been made. 

Example 2 

The situation is the same as in Example 1, except that Company B is not entitled to an expenditure credit in respect of its separate video game trade for the accounting period beginning 1 May 2025, due to its UK expenditure falling below the 10% minimum threshold. 

The transfer is invalid and treated as if it had never been made. Company B cannot use the losses available for surrender by Company A and must withdraw any loss relief claims already made for those losses. 

Company A is no longer prevented from claiming ordinary terminal loss relief. It can make a claim, assuming it has profits to set the losses against.