OTR40040 - Orchestra Tax Relief: losses: completion period
S1217SB Corporation Tax Act 2009 (CTA 2009)
The rules in Part 15dC CTA 2009 modify the normal rules for relieving corporate trading losses.
The completion period is the accounting period in which the Orchestra Production Company (OPC) ceases to carry on the separate orchestral trade.
Prior to the completion period, if a loss is made in the separate orchestral trade the OPC can only surrender the loss for Orchestra Tax Credit, where applicable, or use it against future profits of the same trade.
Losses of the completion period
The restriction on the use of losses applies until the accounting period in which the separate orchestral trade ceases. This accounting period is known as the completion period.
Losses are then treated differently depending on whether they are:
- losses not attributable to Orchestra Tax Relief (OTR), or
- losses attributable to OTR.
This divides the losses into two distinct elements.
Loss not attributable to Orchestra Tax Relief
Any loss not attributable to Orchestra Tax Relief (OTR) that has been carried forward to the completion period and/or been incurred in the completion period can be:
- offset against total taxable profits of the Orchestra Production Company in the completion or previous accounting periods so far as they fall (wholly or partly) within the period of 12 months ending immediately before the completion period begins, or
- surrendered as group relief.
Losses attributable to OTR cannot be relieved in this way.
Any remaining loss not attributable to OTR may only be relieved under the special terminal losses rules (OTR40050).
A loss not attributable to OTR includes all the expenditure of the separate orchestral trade not including the enhancement for OTR. This means non-enhanceable expenditure and enhanceable core expenditure not including the enhancement.
Losses not attributable to OTR are calculated by removing the element of losses attributable to OTR.
Loss attributable to Orchestra Tax Relief
Subject to the special terminal losses rules (OTR40050), any loss attributable to Orchestra Tax Relief (OTR) carried forward to the completion period and not surrendered for Orchestra Tax Credit (OTC) may only be used against profits of the same orchestral trade made in the completion period.
Any loss attributable to OTR that is incurred in the completion period and not surrendered for OTC may only be relieved under the special terminal losses rules (OTR40050).
The amount of a loss attributable to OTR is the loss that has arisen from the enhancement element over and above the enhanceable expenditure. This means the enhancement not including both the non-enhanceable expenditure and enhanceable core expenditure.
Losses attributable to OTR are calculated by deducting from the loss for the period what the losses for the period would be in the absence of OTR.
Where there would have been a profit for the period in the absence of OTR, the deduction from actual losses will be nil. Therefore, the loss attributable to OTR will be the actual loss in the period.
Reform of Corporation Tax loss relief: as of 1 April 2017, the relief available for trading losses carried forward has changed. A restriction has been introduced, 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.