CREC031300 - Taxation: separate trade: cessation
If a company intends to claim听an Audio-Visual or Video Games Expenditure Credit (AVEC or VGEC)听in respect of a film, TV programme听or video game, the production is treated as a separate trade. This isolates the development of each individual production for the purpose of calculating profits or losses.
Separate trade rules to apply until trade ceases听
If a company has made an election to apply the separate trade rules to a production, the company must continue to apply those rules even if:听
the production ceases to be a qualifying production (CREC020000), or听
the company ceases to be a qualifying production company (CREC010200).听
The legislation is in section 1179BA Corporation Tax Act (CTA) 2009听
The production听activities must be treated as a separate trade until the trade itself听ceases.
Cessation of separate production trade听
The same rules apply to the cessation of a separate production听trade as to any other trade. Guidance at BIM80565听onwards sets out the normal cessation rules.听
The question of whether any trade has ceased is a matter of fact. A production company鈥檚 trade may include:听
exploiting a film, TV programme听or video game (see CREC036100),听
selling a production, and all the rights in it, for others to exploit, or听
making films, TV programmes or video games听under contract to another person such that it never holds any of the rights.听
In cases where a production, and all the rights in it, is sold outright, it will be easy to determine听the point where the trade ceases.听
The point of cessation may be less clear where some or all of听the rights in the production are retained听by the production company. Broadly speaking, a trade ceases when the production company no longer actively exploits, nor has any expectation that income will arise from, the production听rights.听
Where a production company retains听rights to enjoy future income from the production听(possibly coupled听to an obligation to make further deferred payments out of those receipts),听that income is regarded as deriving from the ongoing trade of production/development听relating to that trade. This is the case even where receipts follow a 鈥榮tagnant鈥� period during which no income was received. The receipts will not relate to any new trade, nor will they be treated as non-trading (investment) income.听
If a trade ceases, the production company听may be able to use losses under Part 14A听CTA 2009 by using the special terminal loss rule. Please see CREC043000.听