CREC044100 - Losses: examples: losses applied to same production
A television production company听(罢笔颁)听is set up to produce a single series of a programme听and claims AVEC throughout the production.听
The separate trade for the purposes of Part 14A CTA听2009 commences on 3 July 2024听and the company draws up accounts to听31 December. The accounting periods are therefore:听
3 July to 31 December 2024听
Year ended 31 December 2025听
Year ended 31 December 2026听
The programme听is completed on 10 February 2025.听
Note: the expenditure credits in this听example听are calculated on the assumption that UK expenditure is less than 80% of relevant global expenditure.听In reality, the听amount of credit due will vary depending on the proportion of UK expenditure. For guidance on how to calculate the amount of expenditure credit due for an accounting period, please see Chapter 6 of this manual.听
The computations for the first period show:听
Period ended 31 December 2024听 |
拢听 |
Income from the programme听 |
100,000听 |
Costs of the programme听 |
(800,000)听 |
Expenditure credit (34%)听 |
272,000听 |
Loss on the programme听 |
(428,000)听 |
Other income听鈥� non-trade loan relationship听 |
10,000听 |
听
The computation shows a trading loss of 拢428,000. As this is a pre-completion period, the loss is restricted and cannot be offset against other income. The interest income (the non-trade loan relationship income) is therefore taxable.听The 拢428,000 loss is carried forward to the next accounting period.听
In the next accounting period, the computations show:听
Period ended 31 December 2025听 |
拢听 |
Income from the programme听 |
100,000听 |
Costs of the programme听 |
(200,000)听 |
Expenditure credit (34%)听 |
68,000听 |
Loss on the programme听 |
(32,000)听 |
Other income听鈥� non-trade loan relationship听 |
20,000听 |
听
The computation shows a trading loss of 拢32,000.听
Since the programme听was completed on 10 February 2025, this period is the completion period. The trading loss brought forward can be treated as a loss of this听accounting period for the purposes of loss relief.听The amount carried forward into the completion period is 拢428,000.听
The 拢32,000 loss of this accounting period is enhanced by the trading loss brought forward from the earlier period.听The losses available to use in this period are therefore 拢460,000.听
These losses may be:听
set against other profits of the same accounting period听(the 拢20,000 non-trade loan relationship income),听
carried back against profits of the accounting period ended 31 December 2024 (the 拢10,000 non-trade loan relationship income),听or听
surrendered as group relief,听if available.听
Any unused loss is carried forward听again for set off against profits of the same trade.听
The TPC听sets off the losses听against the non-trade loan relationship income of the current听period听and previous听period. This means that there are no taxable profits in the period ended 31 December 2024听and the period ended 31 December 2025.听The TPC does not surrender any of the losses as group relief.听
There are therefore 拢430,000 (拢460,000 - 拢10,000 - 拢20,000) losses remaining听to carry forward into future periods.听
In the final accounting period, the computations show:听
Period ended 31 December 2026听 |
拢听 |
Income from the programme听 |
600,000听 |
Costs of the programme听 |
(100,000)听 |
Expenditure credit (34%)听 |
34,000听 |
Profit听on the programme听 |
534,000听 |
Other income - non-trade loan relationship听 |
50,000听 |
听
The computation for this period shows a trading profit of 拢534,000听and non-trade loan relationship income of 拢50,000. The carried forward losses of 拢430,000 can be set against total profits, so they can听be used against both the trading profits and the non-trade loan relationship income.听
The carried forward loss is set off against trading profits first.听The TPC is therefore left with chargeable profits of:听
Trading profits 拢534,000 - 拢430,000 = 拢104,000听
Non-trade loan relationship income 拢50,000听
Total 拢154,000听
The following table shows how the losses are used in the various accounting periods:听
-听 |
Losses from APE 31/12/2024听(拢)听 |
Losses from APE 31/12/2025听(拢)听 |
APE 31/12/2024听 | ||
Pre-completion听period loss听 |
428,000听 |
-听 |
Losses carried forward into completion period听 |
428,000听 |
-听 |
APE 31/12/2025听 | ||
Losses brought forward听 |
428,000听 |
-听 |
Completion period loss听 |
-听 |
32,000听 |
Loss utilised听against NTLR (Current & previous听period)听 |
-听 |
(30,000)听 |
Loss surrendered as group relief听 |
0听 |
0听 |
Losses carried forward听 |
428,000听 |
2,000听 |
APE 31/12/2026听 | ||
Losses brought forward听 |
428,000听 |
2,000听 |
Utilised听against听trade profits听 |
(428,000)听 |
(2,000)听 |
Remaining听- available to surrender or carry forward听 |
0听 |
0听 |