FPC30030 - Film Production Companies: Losses: Completion and later periods

CTA09/S1210

The film tax regime includes rules which modify the normal loss relief rules for film production companies (FPCs).

For periods from 1 April 2017, the general treatment of carried forward losses has changed. A restriction has been introduced in Part 7ZA CTA 2010, limiting the total amount of relief available for carried-forward losses. In addition, most carried-forward trading losses incurred from 1 April 2017 can be set against total profits, and may be available for surrender as group relief for carried-forward losses. Guidance is available in CTM04800.

Some of these rules are ignored for the purpose of losses of FPCs.

The rules relating to treatment of losses depends on whether the losses are attributable to Film Tax Relief (FTR), when they are incurred and the period to which they are carried forward.

Non-attributable FTR losses brought forward from pre-completion periods

For:

  • the accounting period in which the film is completed (or production is abandoned) and any subsequent period
  • so much of any losses brought forward from earlier periods (for which loss relief was limited to carry forward only (FPC30020)) that
  • are not attributable to FTR
  • are deemed to be losses of the period to which they are brought forward for the purposes of S37 and Part 5 of CTA 2010.

Utilising non-attributable FTR losses in the completion period

Having treated these non-FTR related brought forward losses as losses of the completion (or later) period, the trading loss of the period is then available to:

  • set off against other profits of the same period, or an earlier period under CTA10/S37, or
  • surrender as group relief

but only to the extent that the losses are not attributable to FTR.

Where a loss that is not attributable to FTR is brought forward into the completion period under section CTA10/S45 or S45B it first reduces any profit from the film production activity.

Any surplus (once the profit is reduced to nil) is then treated as a loss of the completion period for the purposes of loss relief. It is available to set off sideways or carry back under section CTA10/S37 or to surrender as group relief under Part 5 CTA10.

So any amount of the loss not attributable to FTR that is not used in the completion accounting period is carried forward again to the next accounting period where, once again, it is available to reduce any profit from the film production trade, or treated as a loss of that accounting period to be relieved sideways, carried back or surrendered as group relief. These losses are subject to the loss restriction rules (CTA10/Part 7ZA).

Treatment of FTR losses brought forward

Where a loss brought forward into the completion period under section CTA10/S45 or S45B is attributable to FTR it is only available to be set against profits of the same trade in the completion accounting period and to be carried forward against profits of the same trade in a subsequent accounting period for as long as the trade continues.

It cannot be relieved sideways, carried forward and set against total profits, carried back, or surrendered as group relief. These losses are not subject to the loss restriction rules (CTA10/Part 7ZA).

Order of set off

This ‘refreshing’ of the non-attributable FTR loss for loss relief purposes continues until the production period loss not attributable to FTR is exhausted or for as long as the trade continues. Because of this ‘refreshing’ it is usually advantageous to a company to treat a loss that is not attributable to FTR and that is carried forward into a completion period or later period as the last part of a loss to be utilised after FTR losses.

Losses incurred in the completion (or later) period

If a loss is made in the film trade in the completion period or a later period, any amount not attributable to FTR can be set off sideways or carried back against total profits under CTA10/S37, carried forward and set against total profits under CTA10/S45A, or surrendered as group relief under Part 5 CTA10. Losses carried forward and set against total profits are subject to the loss restriction rules (CTA10/Part 7ZA).

Losses attributable to FTR can only be carried forward against profits of the same trade in later periods under CTA10/S45 or 45B. These losses are not subject to the loss restriction rules (CTA10/Part 7ZA).