TTR30090 - Losses: surrendered for 皇冠体育appatre Tax Credit

S1217CI(3) Corporation Tax Act 2009 (CTA 2009)

Where a company makes a claim for 皇冠体育appatre Tax Credit (TTC) it surrenders a part of its surrenderable loss for the credit. 皇冠体育app loss surrendered cannot be utilised in any other way.

Example

A 皇冠体育appatrical Production Company (TPC) produces non-touring Production 1 which qualifies for 皇冠体育appatre Tax Relief (TTR). 皇冠体育app company draws up accounts to 31 March.

皇冠体育app separate theatrical trade for the purposes of Part 15C CTA 2009 commences on 3 July 2015 and ceases on 31 March 2017. 皇冠体育app accounting periods are therefore:

  • 3 July 2015 to 31 March 2016
  • year to 31 March 2017

皇冠体育app computations show:

Period ended 31 March 2016 Amount - 拢
Income from the production 100,000
Costs of the production (850,000)
皇冠体育appatre tax relief 鈥� additional deduction (400,000)
Profit/(loss) on production (1,150,000)
Other income - non-trade loan relationship 10,000

皇冠体育app computation shows a trading loss of 拢1,150,000. 皇冠体育app TPC chooses to surrender part of this trading loss for TTC.

皇冠体育app amount of surrenderable loss is the lesser of:

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

皇冠体育app maximum surrenderable loss is therefore 拢400,000 and this is surrendered for TTC of 拢80,000 (拢400,000 x 20% TTC rate for non-touring productions).

This leaves a loss of 拢750,000 which can only be carried forward. As this is a pre-completion period, this loss is restricted and cannot be offset against other income. 皇冠体育app 拢10,000 interest income (the non-trade loan relationship income) is therefore taxable.

Year ended 31 March 2017 Amount - 拢
Income from the production 100,000
Costs of the production (150,000)
皇冠体育appatre tax relief 鈥� additional deduction (100,000)
Profit/(loss) on production (150,000)
Other income - non-trade loan relationship 20,000

皇冠体育app computation shows a trading loss of 拢150,000. This is the completion period in respect of the separate theatrical trade.

Of the brought forward loss of 拢750,000:

  • nil is attributable to TTR, and
  • 拢750,000 is not attributable to TTR.

As this is the completion period, the company can utilise the losses not attributable to TTR against other profits and carry them back to the previous period. 皇冠体育app company therefore utilise losses as follows:

- Amount of loss
Set against other profits of the same accounting period 拢20,000
Carried back against profits of the previous period 拢10,000
Surrendered as group relief nil
Total 拢30,000

This is the maximum amount that can be relieved. This leaves the company with nil total taxable profits in both periods.

皇冠体育app company has unutilised losses brought forward of 拢720,000.

皇冠体育app current year losses may be surrendered for TTC. 皇冠体育app maximum amount of surrenderable loss is the lesser of:

  • 拢870,000, being the 拢150,000 trading loss for the period plus the relevant unused loss of 拢720,000, and
  • the available qualifying expenditure of 拢100,000.

皇冠体育app maximum surrenderable loss is therefore 拢100,000. This produces TTC of 拢20,000 (拢100,000 x 20% TTC rate for non-touring productions) and leaves a trading loss for this accounting period of 拢50,000.

Unless they can be surrendered for group relief or transferred or surrendered under the special terminal loss relief rules, the remaining 拢770,000 losses will be stranded.

皇冠体育app following table shows how the losses are used in the various accounting periods:

- TTR - APE 31/03/2016 - 拢 non-TTR - APE 31/03/2016 - 拢 TTR - APE 31/03/2017 - 拢 non-TTR - APE 31/03/2017 - 拢
APE 31/03/2016 - - - -
Pre-completion period losses 400,000 750,000 - -
Loss surrendered for TTC (400,000) - - -
Loss carried forward nil 750,000 - -
APE 31/03/2017 - - - -
Losses brought forward - 750,000 - -
Completion period losses - - 100,000 50,000
Loss surrendered for TTC - - (100,000) -
Set off against NTLR - (20,000) - -
Carried back against NTLR of previous period - (10,000) - -
Remaining losses - 720,000 nil 50,000