CREC043000 - Losses: terminal losses

Section 1179BG CTA 2009听

The normal rules for terminal losses require the losses to be offset against profits of the same trade arising in the three听years听before the period in which the trade ceases.听The losses cannot be transferred to a different trade.听

There are special rules in Part 14A CTA 2009 which apply to terminal losses when a separate production trade ceases.听

A听separate production trade may cease听while the production company still has unrelieved losses arising in the cessation period or brought forward from previous听periods.听If the trade had not ceased, they听would be available to carry forward under s45A or 45B CTA 2010.听

The production company can elect听to transfer those unrelieved losses to a different production trade. That trade can be:听

  • another trade carried on by the same company, or听

  • another trade carried on by a different production company in the same group.听

A company is in the same group for these purposes if it is in the same group for group relief purposes. See CTM80151.听
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Conditions for valid transfer of losses听

For the transfer to be valid, the trade which receives the losses:听

  • must have been carried on at the time the first trade ceased, and听

  • must be of the same type as the ceased trade.听

Two trades are of the same type if they both relate to productions which are qualifying productions under the same Chapter of Part 14A CTA 2009. In other words,听film and TV programme听trades听are treated as the same type of trade for terminal loss purposes, while a video game trade can only be the same type of trade听as another video game trade.听

This means that:听

  • The terminal loss of a film trade can be transferred to another film trade听or a TV programme听trade听听

  • The terminal loss of a TV programme听trade can be transferred to another TV programme听trade听or a film trade听

  • The terminal loss of a video game trade can only be transferred to another video game trade听

The听transferred听losses are treated as losses brought forward to be set against profits of the recipient听trade only 鈥� the losses are treated as though they are carried forward under s45B CTA 2010, which means they cannot be set against other profits of the company. The losses are treated as if they are carried forward into听the first accounting period of the recipient trade that begins after the cessation.听

If a company transfers losses to a different company, that other company must make a claim in writing to HMRC for the transfer to have effect. The company which makes the transfer cannot get ordinary terminal loss relief under section 45F CTA 2010 in respect of the听losses听transferred to the other company. This is to prevent the same losses from being relieved twice.听

Example听1听

Company A produces听a video game and has unrelieved losses arising from it. Its trade听ceases on 31 October 2024.听

Company B听is in the same group and has a separate trade for a video game,听which is ongoing on 31 October 2024 when Company A鈥檚 trade ceases. Company A agrees to听transfer the losses to Company B, and Company B makes a claim to receive them.听

Company B has a chargeable accounting period ending 30 April 2025. The losses transferred will therefore be treated as brought forward by Company B in the period commencing听1 May 2025.听

Company A cannot claim ordinary terminal loss relief for the surrendered losses.听
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Invalid transfers听

If:听

  • the trade receiving the losses is no longer carried on in the accounting period beginning after the cessation of the trade surrendering the losses, or听

  • the company carrying on the trade receiving the losses is not entitled to an expenditure credit in relation to that trade听for the same accounting period as above, or听

  • the group company receiving losses fails to听make an election,听

the听transfer is not valid听and the surrender of losses is treated as though it had not been made.听

Example 2听

The situation is the same as in Example 1, except that Company B is not entitled to an expenditure credit in respect of its separate video game trade for the accounting period beginning 1 May 2025, due to its UK expenditure falling below the 10% minimum threshold.听

The transfer is invalid and treated as if it had never been made. Company B cannot use the losses available for surrender by Company A and must withdraw any loss relief claims already made for those losses.听

Company A is no longer prevented from claiming听ordinary terminal loss relief. It can make a claim,听assuming it has profits to set the losses against.听