CREC044100 - Losses: examples: losses applied to same production
A television production company (TPC) is set up to produce a single series of a programme and claims AVEC throughout the production.
The separate trade for the purposes of Part 14A CTA 2009 commences on 3 July 2024 and the company draws up accounts to 31 December. The accounting periods are therefore:
3 July to 31 December 2024
Year ended 31 December 2025
Year ended 31 December 2026
The programme is completed on 10 February 2025.
Note: the expenditure credits in this example are calculated on the assumption that UK expenditure is less than 80% of relevant global expenditure. In reality, the amount of credit due will vary depending on the proportion of UK expenditure. For guidance on how to calculate the amount of expenditure credit due for an accounting period, please see Chapter 6 of this manual.
The computations for the first period show:
Period ended 31 December 2024 |
£ |
Income from the programme |
100,000 |
Costs of the programme |
(800,000) |
Expenditure credit (34%) |
272,000 |
Loss on the programme |
(428,000) |
Other income – non-trade loan relationship |
10,000 |
The computation shows a trading loss of £428,000. As this is a pre-completion period, the loss is restricted and cannot be offset against other income. The interest income (the non-trade loan relationship income) is therefore taxable. The £428,000 loss is carried forward to the next accounting period.
In the next accounting period, the computations show:
Period ended 31 December 2025 |
£ |
Income from the programme |
100,000 |
Costs of the programme |
(200,000) |
Expenditure credit (34%) |
68,000 |
Loss on the programme |
(32,000) |
Other income – non-trade loan relationship |
20,000 |
The computation shows a trading loss of £32,000.
Since the programme was completed on 10 February 2025, this period is the completion period. The trading loss brought forward can be treated as a loss of this accounting period for the purposes of loss relief. The amount carried forward into the completion period is £428,000.
The £32,000 loss of this accounting period is enhanced by the trading loss brought forward from the earlier period. The losses available to use in this period are therefore £460,000.
These losses may be:
set against other profits of the same accounting period (the £20,000 non-trade loan relationship income),
carried back against profits of the accounting period ended 31 December 2024 (the £10,000 non-trade loan relationship income), or
surrendered as group relief, if available.
Any unused loss is carried forward again for set off against profits of the same trade.
The TPC sets off the losses against the non-trade loan relationship income of the current period and previous period. This means that there are no taxable profits in the period ended 31 December 2024 and the period ended 31 December 2025. The TPC does not surrender any of the losses as group relief.
There are therefore £430,000 (£460,000 - £10,000 - £20,000) losses remaining to carry forward into future periods.
In the final accounting period, the computations show:
Period ended 31 December 2026 |
£ |
Income from the programme |
600,000 |
Costs of the programme |
(100,000) |
Expenditure credit (34%) |
34,000 |
Profit on the programme |
534,000 |
Other income - non-trade loan relationship |
50,000 |
The computation for this period shows a trading profit of £534,000 and non-trade loan relationship income of £50,000. The carried forward losses of £430,000 can be set against total profits, so they can be used against both the trading profits and the non-trade loan relationship income.
The carried forward loss is set off against trading profits first. The TPC is therefore left with chargeable profits of:
Trading profits £534,000 - £430,000 = £104,000
Non-trade loan relationship income £50,000
Total £154,000
The following table shows how the losses are used in the various accounting periods:
- |
Losses from APE 31/12/2024 (£) |
Losses from APE 31/12/2025 (£) |
APE 31/12/2024 | ||
Pre-completion period loss |
428,000 |
- |
Losses carried forward into completion period |
428,000 |
- |
APE 31/12/2025 | ||
Losses brought forward |
428,000 |
- |
Completion period loss |
- |
32,000 |
Loss utilised against NTLR (Current & previous period) |
- |
(30,000) |
Loss surrendered as group relief |
0 |
0 |
Losses carried forward |
428,000 |
2,000 |
APE 31/12/2026 | ||
Losses brought forward |
428,000 |
2,000 |
Utilised against trade profits |
(428,000) |
(2,000) |
Remaining - available to surrender or carry forward |
0 |
0 |