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CTA09/S1202(4)

Where a company makes a claim for Film Tax Credit it surrenders a part of its surrenderable loss for the credit. Once a loss is utilised in this way it ceases to be a part of the trading loss for that accounting period.

Example

A film production company (FPC) produces one film that qualifies for Film Tax Relief (FTR).

»Ê¹ÚÌåÓýapp trade in relation to the film commences on 3 July 2019 and the film is completed on 10 February 2020. »Ê¹ÚÌåÓýapp company draws up accounts to 31 December. »Ê¹ÚÌåÓýapp accounting periods are therefore:

• 3 July to 31 December 2019
• Year ended 31 December 2020
• Year ended 31 December 2021

»Ê¹ÚÌåÓýapp computations show:

APE 31 December 2019	Amount
Income from the film	100,000
Costs of the film	850,000
Film tax relief - additional deduction	400,000
Loss on film	(1,150,000)
Other income	10,000

»Ê¹ÚÌåÓýapp computation for this period shows a trade loss of 1,150,000. »Ê¹ÚÌåÓýapp company chooses to surrender the maximum amount of this loss for the Film Tax Credit.

»Ê¹ÚÌåÓýapp amount of its surrenderable loss (FPC55100) is the lesser of

• the amount of the available loss for the period - 1,150,000; and
• the available qualifying expenditure - 400,000.

»Ê¹ÚÌåÓýapp maximum surrenderable amount is therefore 400,000 and this is surrendered for Film Tax Credit of 100,000. »Ê¹ÚÌåÓýapp loss of the period is reduced by 400,000 leaving 750,000.

This is a production accounting period and so loss relief is restricted. »Ê¹ÚÌåÓýapp 750,000 loss can only be carried forward under CTA10/S45B. »Ê¹ÚÌåÓýapp other income therefore remains taxable and a loss of 750,000 is carried forward under CTA10/S45B.

It is most beneficial to the company to

• treat the loss attributable to FTR as being the loss surrendered for the Film Tax Credit and
• carry forward the 750,000 of losses not attributable to FTR .

APE 31 December 2020 - completion period	Amount
Income from the film	100,000
Costs of the film	150,000
Film tax relief - additional deduction	100,000
Loss on film	(150,000)
Other income	20,000

This is the completion period. »Ê¹ÚÌåÓýapp computation shows a trade loss of 150,000. »Ê¹ÚÌåÓýapp company chooses to surrender the maximum amount of the trading loss of the year for the Film Tax Credit.

»Ê¹ÚÌåÓýapp amount of the company’s surrenderable loss for this period is the lesser of

• the amount of the available loss for the period - 150,000 + 750,000: 900,000 and
• the available qualifying expenditure - 100,000.

»Ê¹ÚÌåÓýapp maximum surrenderable amount is therefore 100,000 and this is surrendered for Film Tax Credit of 25,000 leaving a trading loss of this accounting period of 50,000.

It is most beneficial for the company to

• treat the loss attributable to FTR as being the loss surrendered for the Film Tax Credit and
• leave the 50,000 of losses not attributable to FTR available for set off under CTA10/S37 or for surrender as group relief.

»Ê¹ÚÌåÓýapp amount carried forward into the completion period that is not attributable to FTR is 750,000. »Ê¹ÚÌåÓýapp total loss of this accounting period for the purposes of loss relief is therefore adjusted to 800,000. »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	20,000
Carry back against profits of an earlier accounting period	nil
Surrender as group relief where appropriate	nil
Total	20,000

This leaves 780,000 available to carry forward.

»Ê¹ÚÌåÓýapp following table tracks the use of the losses in the accounting periods:

-	FTR	non-FTR	FTR	non-FTR
APE 31 December 2019	-	-	-	-
Production period loss	400,000	750,000	-	-
Loss surrendered for film tax credit	400,000	-	-	-
Losses carried forward into completion AP	0	750,000	-	-
APE 31 December 2020	-	-	-	-
Losses brought forward	-	750,000	-	-
Completion period loss	-	-	100,000	50,000
Loss surrendered for film tax credit	-	-	-100,000	-
Loss utilised against other income	-	-	-	-20,000
Losses carried forward	-	750,000	0	30,000
APE 31 December 2021	-	-	-	-
Losses brought forward	-	750,000	0	30,000

-	FTR losses	non-FTR losses
APE 31 December 2019	-	-
Production period loss	400,000	750,000
Surrendered for Film Tax Credit	(400,000)	-
Carried forward	nil	750,000
APE 31 December 2020	-	-
Losses brought forward	nil	750,000
Completion period loss	100,000	50,000
Surrendered for Film Tax Credit	(100,000)	-
Set off against current period other income	-	(20,000)
Carry forward	-	780,000