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A film production company (FPC) produces Film 1, qualifying for FTR. »Ê¹ÚÌåÓýapp company draws upaccounts to 31 December. »Ê¹ÚÌåÓýapp trade in relation to Film 1 commences on 3 July 2009. »Ê¹ÚÌåÓýapp film is completed on 10 February 2010. »Ê¹ÚÌåÓýapp company ceases to trade relating to Film 1 on 15 August 2010 when it sells Film 1 outright.

During the period the company starts to make a second qualifying film, Film 2. »Ê¹ÚÌåÓýapp tradein relation to Film 2 commences on 17 March 2010.

»Ê¹ÚÌåÓýapp accounting periods are therefore:

• 3 July to 31 December 2009
• Year ended 31 December 2010
• Year ended 31 December 2011

»Ê¹ÚÌåÓýapp computations show:

APE 31 December 2009	Amount
Income from Film 1	100,000
Costs of Film 1	(850,000)
Film tax relief � additional deduction	(400,000)
Loss on Film 1	(1,150,000)
Other income	10,000

»Ê¹ÚÌåÓýapp computation for this period shows a trade loss of 1,150,000 on Film 1. Of this, 750,000 is not attributable to FTR; 400,000 is attributable to FTR.

»Ê¹ÚÌåÓýapp company chooses not to surrender any part of this loss for the film tax credit. Thisis a production accounting period and so the use of the loss is restricted. It can only becarried forward under CTA10/S45B.

»Ê¹ÚÌåÓýapp other income profit remains taxable and a loss of 1,150,000 is carried forward.

APE 31 December 2010 � Film 1 completed and trade ceases; Film 2 commences

-	Film 1	Film 2	Other
Income from Film	500,000	800,000	-
Costs of Film	(150,000)	(400,000)	-
Film tax relief � additional deduction	(100,000)	(300,000)	-
Profit on Film 1	250,000	100,000	-
Other income	-	-	20,000

»Ê¹ÚÌåÓýapp computation for this period shows a profit of 250,000 on Film 1 and a profit of 100,000 on Film 2. This is a completion accounting period and a cessation accounting period in respect of Film 1.

»Ê¹ÚÌåÓýapp brought forward loss of 1,150,000 reduces the profit on Film 1 to nil leaving a lossof 900,000. Under normal circumstances this loss would only be available to carry forwardto the next accounting period for set off against profits of the same trade. But, if any part of the loss is not attributable to FTR and is derived from a production period it can instead be treated as a loss of the later accounting period for the purposes of loss relief.

»Ê¹ÚÌåÓýapp brought forward loss that is attributable to FTR (400,000) is sufficient to cover the profits of the same trade, leaving 150,000 of those losses unused.

»Ê¹ÚÌåÓýapp whole of the brought forward production period loss not attributableto Film Tax Relief (750,000) can now treated as a loss of this accounting period for the purposes of loss relief. »Ê¹ÚÌåÓýapp options available for these losses, and the extent to which the company chooses to utilise those options are as follows:

-	Amount of loss
Set against other profits of the same accounting period	120,000
Carry back against profits of an earlier accounting period	10,000
Surrender as group relief where appropriate	200,000
Total	330,000

Of the full brought forward loss of 1,150,000 a total of 580,000 has been utilized (250,000 of the losses attributable to FTR plus 330,000 of losses not so attributable).»Ê¹ÚÌåÓýapp remaining 570,000 would be available to carry forward under S45A CTA10 but for the fact that the trade has now ceased. In normal circumstances this loss would be stranded.

»Ê¹ÚÌåÓýapp company instead elects to treat the stranded loss as a loss brought forward in the trade in relation to Film 2 in the next accounting period.

APE 31 December 2011	Amount
Income from Film 2	1,000,000
Costs of Film 2	(400,000)
Film tax relief � additional deduction	(200,000)
Profit on Film 2	400,000
Other income	50,000

»Ê¹ÚÌåÓýapp computation for this period ended 31 December 2011 shows a trade profit in Film 2 of400,000. This is reduced to nil by the loss treated as brought forward in the trade of 570,000.

»Ê¹ÚÌåÓýapp remaining 170,000 is now available to carry forward into the next accounting period asa loss brought forward in the trade in relation to Film 2. This loss will now only beavailable to utilise against profits of the trade in respect of Film 2. Note that the special treatment afforded to some production period losses does not carry over into the Film 2 trade.

»Ê¹ÚÌåÓýapp following table tracks the losses in the accounting periods.

-	FTR losses - Film 1	non-FTR losses - Film 1	Film 2
APE 31 December 2009	-	-	-
Production period loss carried forward into completion period	400,000	750,000	-
APE 31 December 2010	-	-	-
Losses brought forward	400,000	750,000	-
Set off against current period profit of Film 1	(250,000)	-	-
Set off against current period other income profits	-	(20,000)	-
Set off against current period profits of Film 2	-	(100,000)	-
Carried back against other income profits of earlier period	-	(10,000)	-
Surrendered as group relief	-	(200,000)	-
Carried forward to set against future profits of Film 2	150,000	420,000	-
APE 31 December 2011	-	-	-
Losses brought forward	-	-	570,000
Set off against current period profits of Film 2	-	-	(400,000)
Loss carried forward	-	-	170,000