(1) The amount of the expenditure credit to which a qualifying company is entitled for an accounting period is determined as follows.
Step 1
Ascertain the total of the company’s relevant global expenditure (see subsection (2)) for all accounting periods up to and including the present one.
Step 2
Deduct from that total any expenditure that is not UK expenditure (see section 1179AB).
Step 3
If the amount remaining after step 2 exceeds 80% of the total ascertained at step 1, deduct the amount of the excess.
The remaining amount is the company’s “qualifying expenditure to date”.
Step 4
Deduct from the company’s qualifying expenditure to date the amount (if any) that was the company’s qualifying expenditure to date in the accounting period for which it was last entitled to, and claimed, an expenditure credit in respect of the qualifying production.
The remaining amount is the company’s “qualifying expenditure for the period”.
Step 5
The amount of the credit to which the company is entitled is the relevant percentage of the company’s qualifying expenditure for the period.
The relevant percentage is determined by—
section 1179DV, in the case of a film or television programme;
section 1179FN, in the case of a video game.
(2) Expenditure is “relevant global expenditure” for an accounting period if—
(a) it is brought into account under section 1179BB in calculating the profits of the separate production trade for that period, and
(b) it counts as relevant production expenditure in relation to the qualifying production under—
(i) section 1179DR, in the case of a film or television programme;
(ii) section 1179FJ, in the case of a video game.
1179CB Expenditure credit to count as taxable receipt
(1) An expenditure credit under this Chapter is not to be treated as income for the purposes of section 1179BB.
(2) But if a company is entitled to, and claims, an expenditure credit under this Chapter for an accounting period, the profits of the separate production trade for that period must (having first been calculated in accordance with section 1179BB) be adjusted by bringing the amount of the expenditure credit into account as a credit.
If a company is entitled to, and claims, an expenditure credit under this Chapter for an accounting period, the credit is to be dealt with as follows.
Step 1
The amount of the credit is to be applied in discharging any liability of the company to pay corporation tax for the accounting period.
Step 2
Any amount remaining after step 1 is to be reduced, if necessary, to the amount given by—
A-B
where—
A is the initial amount of the credit (before step 1), and
B is the amount of corporation tax that would be chargeable on that amount if it were an amount of profits for the accounting period on which corporation tax was chargeable at the main rate.
For provision about the treatment of an amount deducted under this step, see section 1179CD.
Step 3
The amount remaining after step 2 is to be applied in discharging any liability of the company to pay corporation tax for any other accounting period.
Step 4
If the company is a member of a group, it may surrender the whole or part of any amount remaining after step 3 to any other member of the group (as to which see section 1179CE).
Step 5
Any amount remaining after step 4 is to be applied in discharging any other liability of the company to pay a sum to the Commissioners for His Majesty’s Revenue and Customs—
under or by virtue of an enactment, or
under an agreement made in connection with any person’s liability to make a payment to the Commissioners under or by virtue of an enactment.
Step 6
Any amount remaining after step 5 is (subject to sections 1179CG and 1179CH) to be paid to the company by an officer of Revenue and Customs.
(1) This section applies if an amount is deducted under step 2 in section 1179CC from the amount of the qualifying company’s expenditure credit.
(2) If the qualifying company is a member of a group, it may, in respect of the accounting period for which the expenditure credit arises, surrender the whole or part of the deducted amount to any other member of the group (as to which see section 1179CE).
(3) To the extent that the deducted amount is not surrendered under subsection (2), it is to be carried forward to the next accounting period of the qualifying company, and subsections (4) and (5) apply.
(4) The carried-forward amount is to be applied in discharging any liability of the qualifying company to pay corporation tax for the accounting period.
(5) If—
(a) any of the carried-forward amount remains after the application of subsection (4), and
(b) the qualifying company is a member of a group,
the qualifying company may, in respect of the accounting period, surrender the whole or part of the remaining amount to any other member of the group (as to which see section 1179CE).
(6) If any of the carried-forward amount remains after the application of subsections (4) and (5), it is to be carried forward to the next accounting period of the qualifying company, and those subsections apply again in relation to that accounting period.
1179CE Amounts surrendered to other group companies
(1) Subsection (3) applies if an amount of expenditure credit is surrendered by the qualifying company to another member of its group under step 4 in section 1179CC or under section 1179CD(2) or (5).
(2) For the purposes of that subsection—
(a) the accounting period in respect of which the surrender is made is “the surrender AP”;
(b) an accounting period of the other group member is an “overlapping AP” if it overlaps to any extent with the surrender AP.
(3) The surrendered amount is to be dealt with as follows.
Step 1
Select an overlapping AP.
Step 2
Calculate the proportion of the overlapping AP that overlaps with the surrender AP, and apply that proportion to the amount of corporation tax payable by the other group member for that overlapping AP.
Step 3
Calculate the proportion of the surrender AP that overlaps with the overlapping AP, and apply that proportion to the surrendered amount.
Step 4
The amount given by step 3 is to be applied in discharging the liability of the other group member to pay the corporation tax mentioned in step 2, up to the amount given by that step.
Step 5
Select another overlapping AP, if there is one, and repeat steps 2 to 4.
Step 6
If any of the surrendered amount remains after steps 2 to 4 have been taken in relation to each overlapping AP, the remainder is to be treated for the purposes of section 1179CC or (as the case may be) section 1179CD as if it had not been surrendered as mentioned in subsection (1).
(4) A surrender to which subsection (3) applies is not to be—
(a) taken into account in determining, for corporation tax purposes, the profits of the qualifying company or the other group member, or
(b) regarded for corporation tax purposes as the making of a distribution.
(5) Subsection (6) applies (in addition to subsection (3)) if—
(a) the qualifying company and the other group member have an agreement between them in relation to the surrendering of amounts of expenditure credit, and
(b) as a result of the agreement the other group member makes a payment to the qualifying company that does not exceed the total amount of expenditure credit surrendered to the other group member.
(6) The payment is not to be—
(a) taken into account in determining, for corporation tax purposes, the profits of the qualifying company or the other group member, or
(b) regarded for corporation tax purposes as a distribution.
(1) An amount within subsection (2) is to be applied as described in that subsection before any amount within subsection (3) is applied as described in that subsection.
(2) An amount is within this subsection if it is to be applied under—
(a) section 1179CD(4), or
(b) section 1179CE(3) as it applies in relation to an amount surrendered under section 1179CD(2) or (5),
in discharging the liability of a company to pay corporation tax for an accounting period.
(3) An amount is within this subsection if it is to be (or would but for subsection (1) be) applied under—
(a) section 1179CC, or
(b) section 1179CE(3) as it applies in relation to an amount surrendered under section 1179CC,
in discharging the same liability as an amount within subsection (2).
1179CG No credit payable if company in administration or liquidation
(1) No amount may be paid to a company at step 6 of section 1179CC if, when the company claims the expenditure credit from which the amount is derived, the company is in administration or liquidation.
(2) For the purposes of this section, a company is in administration if—
(a) it is in administration under Part 2 of the Insolvency Act 1986 or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or
(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.
(3) For the purposes of this section, a company is in liquidation if—
(a) it is in liquidation within the meaning of section 247 of that Act or Article 6 of that Order, or
(b) a corresponding situation under the law of a country or territory outside the United Kingdom exists in relation to the company.
1179CH No credit payable if certain tax matters outstanding
(1) Subsection (2) applies if—
(a) a company would (but for that subsection) be entitled to be paid an amount at step 6 of section 1179CC, and
(b) the company’s tax return for the accounting period in question is enquired into by an officer of Revenue and Customs.
(2) The amount does not have to be paid to the company; but an officer of Revenue and Customs may make a payment on a provisional basis of such amount as the officer thinks fit.
(3) Subsection (4) applies if—
(a) a company would (but for that subsection) be entitled to be paid an amount at step 6 of section 1179CC, and
(b) the company has not paid to an officer of Revenue and Customs any amount that it is required to pay—
(i) under PAYE regulations,
(ii) under section 966 of ITA 2007 (visiting performers), or
(iii) in respect of Class 1 national insurance contributions,
for payment periods ending in the accounting period in question.
(4) The amount does not have to be paid to the company; but an officer of Revenue and Customs may make a payment of such amount as the officer thinks fit.
(5) For the purposes of subsection (3), a “payment period” is—
(a) in relation to PAYE regulations or Class 1 national insurance contributions, a period—
(i) which ends on the fifth day of a month, and
(ii) for which the company is liable to account for income tax and national insurance contributions to an officer of Revenue and Customs;
(b) in relation to section 966 of ITA 2007, a period for which the company is required to make a return as described in section 969(1)(b) of that Act.
1179CI Disqualifying arrangements and non-commercial transactions
(1) Subsections (2) and (3) apply if, at any time, a company is party to disqualifying arrangements in relation to anything that is, was or becomes a qualifying production (“the production”).
(2) The company is not entitled to an expenditure credit under this Chapter in respect of the production for any accounting period.
(3) Any relevant company tax return must be amended accordingly.
(4) Subsection (5) applies if a transaction—
(a) is attributable to arrangements (other than disqualifying arrangements) entered into otherwise than for genuine commercial reasons, and
(b) would result in a company obtaining a relevant advantage.
(5) The relevant advantage is to be counteracted by the making of just and reasonable adjustments to any amounts relevant to the calculation of the company’s entitlement to an expenditure credit under this Chapter.
(6) Those adjustments may be made (for example) by way of amendment, assessment, or modification of an assessment.
(7) For the purposes of this section, arrangements are disqualifying arrangements if their main purpose, or one of their main purposes, is to enable the company to obtain a relevant advantage.
(8) But such arrangements are not disqualifying arrangements if the obtaining of that advantage as a result of the arrangements could reasonably be regarded as consistent with—
(a) the principles (whether expressed or implied) on which the provisions of this Part are based, and
(b) the policy objectives of those provisions.
(9) For the purposes of this section, a company would obtain a relevant advantage if it would become entitled to an expenditure credit under this Chapter—
(a) to which it would not otherwise be entitled, or
(b) of a greater amount than that to which it would otherwise be entitled.
(10) In this section, “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable.
1179D Application of Chapters 2 and 3 to films and television programmes
(1) For the purposes of this Part—
(a) a qualifying film (see section 1179DB) or qualifying television programme (see section 1179DE) is a qualifying production, and
(b) the production company for a qualifying film or a qualifying television programme (see section 1179DP) is the qualifying company for that film or programme.
(2) The following provisions of this Chapter apply for the purposes of this Part in relation to films and television programmes.
(3) Expenditure credit under Chapter 3 is called “audiovisual expenditure credit” when the entitlement to it arises in respect of a film or television programme.
(1) “Film” includes any record, however made, of a sequence of visual images that is capable of being used as a means of showing that sequence as a moving picture.
(2) Each part of a series of films is treated as a separate film, unless—
(a) the films form a series with not more than 26 parts,
(b) the combined playing time is not more than 26 hours, and
(c) the series constitutes a self-contained work or is a series of documentaries with a common theme,
in which case the films are treated as a single film.
(3) References to a film include the film soundtrack.
A film is a qualifying film if it meets—
(a) the theatrical release condition (see section 1179DC),
(b) the British certification condition (see section 1179DJ), and
(c) the UK expenditure condition (see section 1179DO).
(1) A film meets the theatrical release condition if—
(a) the film is intended for exhibition to the paying public at the commercial cinema, and
(b) a significant proportion of the earnings from the film is intended to be obtained by such exhibition.
(2) If the film does not meet that condition in an accounting period after the opt-in period, it cannot meet it in any subsequent accounting period (subject to section 1179E).
(1) “Television programme” means any programme (with or without sounds) which—
(a) is produced to be seen on television or on the internet, and
(b) consists of moving or still images or of legible text or of a combination of those things.
(2) Two or more television programmes that are commissioned together under the same agreement are to be treated as a single television programme.
A television programme is a qualifying television programme if—
(a) it is of an eligible category (see section 1179DF),
(b) it is not an excluded programme (see section 1179DG),
(c) it meets the broadcast condition (see section 1179DH),
(d) in the case of a programme that is not an animation or a children’s programme, it meets the slot length and hourly cost conditions (see section 1179DI),
(e) it meets the British certification condition (see section 1179DJ), and
(f) it meets the UK expenditure condition (see section 1179DO).
(1) The eligible categories of television programme are—
(a) dramas,
(b) documentaries,
(c) animations, and
(d) children’s programmes.
(2) A television programme is a drama if—
(a) it consists wholly or mainly of a depiction of events,
(b) the events are depicted wholly or mainly by one or more persons performing, and
(c) the whole or a major proportion of what is done by the person or persons performing, whether by way of speech, acting, singing or dancing, involves the playing of a role.
(Accordingly, “drama” may include a comedy.)
(3) A television programme is a documentary if—
(a) it depicts real events, places or circumstances,
(b) it is not a drama, and
(c) it is primarily intended to record or inform.
(4) A programme is a children’s programme if, when production activities begin, it is reasonable to expect that the persons who will make up the programme’s primary audience will be under the age of 15.
(5) See section 1179EA(3) for the meaning of “animation”.
(1) A television programme is an excluded programme if—
(a) it is an advertisement or other promotional programme,
(b) it is a news or current affairs programme or discussion programme,
(c) it is a quiz show, game show, panel show, variety show, chat show or similar entertainment,
(d) it consists of or includes a competition or contest, or the results of a competition or contest,
(e) it is a broadcast of a live event or of a theatrical or artistic performance given otherwise than for the purpose of being filmed, or
(f) it is produced for training purposes.
(2) But a children’s programme is not an excluded programme by virtue of being a quiz show or game show, or falling within subsection (1)(d), if the prize total does not exceed £1,000.
(3) For that purpose the “prize total” for a programme is the total of—
(a) the amount of each relevant prize that is a money prize, and
(b) the amount spent on each other relevant prize by, or on behalf of, its provider;
and here “relevant prize” means a prize offered in connection with participation in a quiz, game, competition or contest in, or promoted by, the programme.
(4) The Treasury may by regulations amend subsection (2) for the purpose of increasing the amount of the money limit for the time being specified in that subsection.
(1) A television programme meets the broadcast condition if—
(a) it is intended for broadcast to the general public, and
(b) it is not a film that meets the theatrical release condition (see section 1179DC).
(2) If the television programme does not meet that condition in an accounting period after the opt-in period, it cannot meet it in any subsequent accounting period (subject to section 1179E).
(1) A television programme that consists of distinct episodes meets the slot length condition if the slot length of each episode is greater than 20 minutes.
(2) A television programme that does not consist of distinct episodes meets the slot length condition if the slot length of the programme is greater than 20 minutes.
(3) A television programme meets the hourly cost condition if the average core expenditure per hour of slot length in relation to the programme is at least £1 million.
(4) In this section, “slot length” means the period of time which the episode or (as the case may be) programme is commissioned to fill.
1179DJ British certification condition: provisional and final satisfaction
(1) In this section, references to a certificate are to be read—
(a) in relation to a film, as references to a certificate under Schedule 1 to the Films Act 1985, and
(b) in relation to a television programme, as references to a certificate under section 1179DM.
(2) A film or television programme meets the British certification condition in a pre-completion period (see section 1179DY) if the production company’s company tax return for the period is accompanied by a valid interim certificate.
(3) A film or television programme meets the British certification condition in the completion period (see section 1179DY) and any subsequent accounting period if—
(a) the production company’s company tax return for the completion period is accompanied by a valid final certificate, or
(b) the production company has abandoned production activities in relation to the film or programme and the production company’s company tax return for the completion period is accompanied by a valid interim certificate.
(4) Subsections (2) and (3) are subject to subsections (5) and (6).
(5) If a film or television programme does not meet the British certification condition in the completion period, it is no longer to be regarded as having met the condition (nor, therefore, as being a qualifying film or qualifying television programme) in any pre-completion period.
(6) If a certificate is revoked after the production company’s company tax return for a period is submitted, the film or programme in question is no longer to be regarded as having met the British certification condition (nor, therefore, as being a qualifying film or qualifying television programme) in that period in reliance on that certificate.
(7) Subsection (6) does not apply to the extent that a direction under paragraph 3 of Schedule 1 to the Films Act 1985 or section 1179DM provides that the certificate is to be treated as having effect.
(8) For the purposes of this section, a certificate is valid if it has effect on the day on which the production company’s company tax return is submitted.
(1) Where a certificate is granted in relation to a film under Schedule 1 to the Films Act 1985, if—
(a) the application for the certificate specifies that it is an application for a low-budget certificate, and
(b) the Secretary of State is satisfied that the budget condition and the creative connection condition are met,
the certificate must (in addition to certifying that the film is or will be a British film) certify the film as a low-budget film.
(2) The budget condition is a condition, to be set out in regulations, requiring specified expenditure incurred, or currently or previously anticipated to be incurred, in relation to the film not to exceed a specified amount.
(3) The creative connection condition is—
(a) in the case of an interim certificate, that the film, if completed in accordance with the proposals set out in the application, will satisfy subsection (4);
(b) in the case of a final certificate, that the film satisfies subsection (4).
(4) A film satisfies this subsection if—
(a) the director or scriptwriter of the film, or any other person working on the film in a specified role, is a British citizen or is ordinarily resident in the United Kingdom, or
(b) the film is a qualifying co-production.
(5) Regulations may—
(a) provide for the budget condition to be different in relation to interim certification and final certification;
(b) modify the test in subsection (4)(a) in relation to films that have more than one director or scriptwriter or person working in a role specified under that provision;
(c) prescribe the particulars and evidence necessary for satisfying the Secretary of State that the budget condition or the creative connection condition is met.
(6) The reference in paragraph 9(1) of Schedule 1 to the Films Act 1985 (right to apply to court) to a decision under paragraph 3 of that Schedule includes a decision under subsection (1).
(7) A low-budget certificate may not be granted in relation to a film if another certificate under Schedule 1 to the Films Act 1985 or a certificate under section 1179DM has effect in relation to the film; and vice versa.
(8) A low-budget certificate may be surrendered by the production company; and a surrendered certificate ceases to have effect in respect of all accounting periods.
(9) A film is a “certified low-budget film” in relation to an accounting period if the production company’s company tax return for the period is accompanied by a low-budget certificate which has effect on that day the return is submitted.
(10) In this section—
“low-budget certificate” means a certificate granted in accordance with subsection (1);
“regulations” means regulations made by the Secretary of State with the approval of the Treasury;
“specified” means specified in regulations.
1179DK Television programmes: test for certification
(1) The Secretary of State, with the approval of the Treasury, may by regulations specify conditions which must be met by a television programme before it may be certified as a British programme.
(2) Such regulations may—
(a) specify different conditions in relation to different descriptions of programme;
(b) provide that certain descriptions of programme may not be certified as a British programme;
(c) enable the Secretary of State to direct that any provision made by virtue of paragraph (b) does not apply to a programme that meets certain conditions.
1179DL Television programmes: applications for certification
(1) The production company for a television programme may apply to the Secretary of State for a certificate under section 1179DM in relation to the programme.
(2) An application may be for an interim certificate or a final certificate.
(3) An interim certificate is a certificate that—
(a) is granted before the programme is completed (see section 1179EB), and
(b) states that the programme, if completed in accordance with the proposals set out in the application, will be a British programme.
(4) A final certificate is a certificate that—
(a) is granted after the programme is completed, and
(b) states that the programme is a British programme.
(5) The Secretary of State may require an applicant to provide documents or information to assist the Secretary of State in determining the application.
(6) The Secretary of State may require information provided for the purposes of an application to be accompanied by a statutory declaration, made by the person providing it, as to the truth of the information.
(7) The Secretary of State may by regulations make provision supplementing this section, including—
(a) provision about the form of applications,
(b) provision about the particulars and evidence necessary for satisfying the Secretary of State that a programme meets any conditions that apply by virtue of section 1179DK, and
(c) provision that any statutory declaration which is required by subsection (6) to be made by any person may be made on the person’s behalf by such person as is specified in the regulations.
1179DM Television programmes: certification and revocation
(1) If—
(a) an application is made in accordance with section 1179DL, and
(b) the Secretary of State is satisfied that the television programme concerned meets any conditions that apply by virtue of section 1179DK,
the Secretary of State must certify the programme accordingly.
(2) An interim certificate—
(a) may be given subject to conditions, and (unless the Secretary of State directs otherwise) is of no effect if the conditions are not met, and
(b) may be expressed to expire after a specified period, and (unless the Secretary of State directs otherwise) ceases to have effect at the end of that period.
(3) If it appears to the Secretary of State that a film or television programme certified under this section ought not to have been certified, the Secretary of State may revoke the certificate.
(4) Unless the Secretary of State directs otherwise, a certificate that is revoked is treated as never having had effect.
1179DN Disclosure of information for certification purposes
(1) Section 18(1) of the Commissioners for Revenue and Customs Act 2005 (restriction on disclosure by Revenue and Customs officials) does not prevent disclosure to the Secretary of State for the purposes of the Secretary of State’s functions under—
(a) Schedule 1 to the Films Act 1985, or
(b) sections 1179DJA to 1179DM.
(2) Information disclosed to the Secretary of State for those purposes may be disclosed by the Secretary of State to the British Film Institute.
(3) The Treasury may by regulations amend subsection (2)—
(a) so as to substitute for the person or body specified in that subsection a different person or body, or
(b) in consequence of a change in the name of the person or body so specified.
(4) A person to whom information is disclosed under subsection (1) or (2) may not otherwise disclose it except—
(a) for the purposes of the Secretary of State’s functions under the provisions referred to in subsection (1),
(b) if the disclosure is authorised by an enactment,
(c) in pursuance of an order of a court,
(d) for the purposes of a criminal investigation or legal proceedings (whether criminal or civil) connected with the operation of this Part or Schedule 1 to the Films Act 1985,
(e) with the consent of the Commissioners for His Majesty’s Revenue and Customs, or
(f) with the consent of each person to whom the information relates.
(5) Section 19 of the Commissioners for Revenue and Customs Act 2005 (offence of unlawful disclosure of revenue and customs information) applies in relation to a contravention of subsection (4) as it applies in relation to a contravention of the provisions referred to in subsection (1) of that section.
1179DO UK expenditure condition: provisional and final satisfaction
(1) A film or television programme meets the UK expenditure condition in a pre-completion period (see section 1179DY) if—
(a) the production company’s company tax return for the period states—
(i) the total amount of core expenditure that is expected to be incurred in relation to the film or programme, and
(ii) the amount of that expenditure that is expected to be UK expenditure, and
(b) the second of those amounts is at least 10% of the first.
(2) A film or television programme meets the UK expenditure condition in the completion period (see section 1179DY) and any subsequent accounting period if—
(a) the production company’s company tax return for the completion period states—
(i) the total amount of core expenditure that has been incurred in relation to the film or programme, and
(ii) the amount of that expenditure that is UK expenditure, and
(b) the second of those amounts is at least 10% of the first.
(3) Subsection (1) is subject to subsections (4) and (5).
(4) If a film or television programme does not meet the UK expenditure condition in a pre-completion period, it is no longer to be regarded as having done so (nor, therefore, as being a qualifying film or qualifying television programme) in any previous accounting period by virtue of subsection (1) as it applies to that previous period.
(5) If a film or television programme does not meet the UK expenditure condition in the completion period, it is no longer to be regarded as having done so (nor, therefore, as being a qualifying film or qualifying television programme) in any pre-completion period.
(6) References in this section to core expenditure are to core expenditure incurred—
(a) in the case of a film or programme other than a qualifying co-production, by the production company, or
(b) in the case of a qualifying co-production, by the co-producers.
(7) The Treasury may by regulations amend the percentage specified in subsection (1) or (2).
(1) A company is the production company for a film or television programme that is not a qualifying co-production if—
(a) it is responsible for—
(i) pre-production, principal photography and post-production of the film or programme, and
(ii) delivery of the film or programme in completed form,
(b) it is actively engaged in production planning and decision-making during pre-production, principal photography and post-production,
(c) it directly negotiates, contracts and pays for rights, goods and services in relation to the film or programme, and
(d) it is more directly engaged in the matters described in paragraphs (a) to (c), taken as a whole, than any other company that satisfies those paragraphs.
(2) A company is the production company for a film or television programme that is a qualifying co-production if—
(a) the company is a co-producer of the co-production,
(b) the company makes an effective creative, technical and artistic contribution to the film or programme, and
(c) its creative, technical, and artistic contribution is greater than that of any other company that—
(i) is also a co-producer of the co-production, and
(ii) is chargeable to corporation tax on income it receives from the film or programme (or would be if it received any).
(3) Activities carried on in partnership are to be ignored in determining whether a company is the production company for a film or television programme.
(1) A film is a “qualifying co-production” if it falls to be treated as a national film in the United Kingdom under an international agreement.
(2) A television programme is a “qualifying co-production” if it is eligible to be certified under section 1179DM under an international agreement.
(3) A company is a “co-producer” of a qualifying co-production if it is regarded as such under the international agreement by virtue of which the film or television programme in question is a qualifying co-production.
(4) In this section, “international agreement” means an agreement between His Majesty’s Government in the United Kingdom and any other government, international organisation or authority.
(1) Expenditure incurred by the production company for a film or television programme counts as “relevant production expenditure” for the purposes of section 1179CA(2) if—
(a) it is core expenditure in relation to that film or television programme (see section 1179DS), and
(b) it is not excluded expenditure (see sections 1179DT and 1179DU).
(2) But for the purposes of step 1 in section 1179CA(1) as it applies in relation to a certified low-budget film (see section 1179DJA(9))—
(a) no more than £15 million can count towards the total of the production company’s relevant global expenditure, and
(b) UK expenditure counts towards that total before other expenditure.
Expenditure is “core expenditure” in relation to a film or television programme if it is expenditure on the pre-production, principal photography or post-production of the film or programme.
1179DT Excluded expenditure: research and development and unpaid amounts
(1) Expenditure is excluded expenditure to the extent that the production company would, in respect of the expenditure, be able to claim—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) relief under Part 13 (relief for expenditure on research and development).
(2) Expenditure is excluded expenditure for an accounting period to the extent that it is not paid before the end of the period of four months beginning with the first day after the final day of the accounting period.
1179DU Excluded expenditure: non-arm’s-length dealings with connected parties
(1) Expenditure is excluded expenditure to the extent that it represents connected party profit, unless subsection (3) applies.
(2) For the purposes of subsection (1), expenditure represents connected party profit—
(a) if it is a payment to a person (“C”) in exchange for something supplied by that person,
(b) if the production company is connected with C, and
(c) if, and to the extent that, the amount of the payment exceeds the expenditure incurred by C in supplying that thing.
(3) This subsection applies if the amount of the payment is no more than would have been the case had the transaction been entered into at arm’s length.
(4) A transaction would have been entered into “at arm’s length” if it made “the arm’s length provision” within the meaning of Part 4 of TIOPA 2010 (and for this purpose any limitation on the application of that Part is to be disregarded).
(5) Subsections (6) and (7) apply if—
(a) the supply by C to the production company is one of a sequence of transactions in which the thing supplied has been supplied by one person to another, and
(b) either—
(i) each transacting party in the sequence is connected to at least one other transacting party in the sequence, or
(ii) each transaction in the sequence is entered into in furtherance of a single scheme or arrangement (of whatever kind, and whether or not legally enforceable).
(6) The reference to C in subsection (2)(c) is to be read as a reference to the supplier in the first transaction in the sequence.
(7) The reference to the transaction in subsection (3) is to be read as including each transaction in the sequence.
(8) In this section, “payment” includes any transfer of value.
1179DV Percentage of qualifying expenditure translated into credit
(1) This section determines the relevant percentage for the purposes of step 5 in section 1179CA(1).
(2) In the case of—
(a) a qualifying film that is not an animation or a certified low-budget film, or
(b) a qualifying television programme that is not an animation or a children’s programme,
the relevant percentage is 34%.
(3) In the case of—
(a) a qualifying film that is an animation but is not a certified low-budget film, or
(b) a qualifying television programme that is an animation or a children’s programme,
the relevant percentage is, subject to the following subsections, 39%.
(4) Subsection (5) applies if, for any accounting period, the production company is entitled to, and claims, an audiovisual expenditure credit on the basis that the film or programme falls within subsection (2).
(5) In relation to any subsequent accounting period, the relevant percentage is 34%.
(5A) In the case of a qualifying film that is a certified low-budget film (see section 1179DJA(9)), the relevant percentage is 53%.
(6) The Treasury may by regulations replace the percentage for the time being specified in subsection (2), (3) , (5) or (5A) with a different percentage.
For the purposes of section 1179B, the production company for a film or television programme is treated as beginning the separate production trade in respect of the film or programme—
(a) when pre-production of the film or programme begins,
(b) if earlier, when any income from the film or programme is received by the company.
(1) This section applies for the purposes of section 1179BB as that section applies in relation to a film or television programme.
(2) Expenditure counts towards the costs of the film or programme if it is expenditure on—
(a) production activities in connection with the film or programme, or
(b) activities with a view to exploiting the film or programme.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) Receipts count towards the income from the film or programme if they are receipts in connection with the making or exploitation of the film or programme, including—
(a) receipts from the sale of the film or programme or rights in it,
(b) royalties or other payments for use of the film or programme, or aspects of it (for example, characters or music),
(c) payments for rights to produce games or other merchandise, and
(d) receipts by way of a profit share agreement.
(1) A reference to an accounting period, in relation to a film or television programme, is a reference to an accounting period of the production company for the film or programme.
(2) A reference to the “completion period”, in relation to a film or television programme, is a reference to the accounting period in which—
(a) the film or programme is completed (see section 1179EB), or
(b) the production company abandons production activities in relation to the film or programme.
(3) The production company for a film or television programme must, in its company tax return for the completion period, state whichever of those has occurred.
(4) A reference to a “pre-completion period”, in relation to a film or television programme, is a reference to any accounting period before the completion period in relation to that film or programme.
(5) In this section, “production company” includes a company that is no longer the production company for the film or television programme but is still carrying on the separate production trade in relation to it.
1179DZ Effect of move out of higher-percentage category
(1) Subsection (2) applies if, for an accounting period, a production company is entitled to, and claims, an audiovisual expenditure credit—
(a) in respect of a film on the basis that it is an animation, or
(b) in respect of a television programme on the basis that it is an animation or a children’s programme.
(2) The production company may not, for any subsequent accounting period, claim an audiovisual expenditure credit in respect of the film or programme on the basis that it is—
(a) a qualifying film other than an animation, or
(b) a qualifying television programme other than an animation or a children’s programme.
(3) Subsection (2) ceases to apply if the company amends its company tax return for the accounting period referred to in subsection (1) to withdraw the claim for expenditure credit for that period.
(4) An amendment may be made for that purpose despite any limitation on the time within which the return could normally be amended.
1179E Production qualifying consecutively as film and television programme
(1) The same production may be a qualifying film in one accounting period and a qualifying television programme in a subsequent accounting period, or vice versa.
(2) Such a change does not interrupt the application of this Part in relation to the film or programme.
(3) Section 1179DC(2) does not apply to a failure to meet the theatrical release condition in an accounting period if, in that period, the film was a qualifying television programme.
(4) Section 1179DH(2) does not apply to a failure to meet the broadcast condition in an accounting period if, in that period, the television programme was a qualifying film.
(5) A certificate under Schedule 1 to the Films Act 1985 has effect for the purposes of this Part as it may apply to the certified film as a television programme.
(6) A certificate under section 1179DM has effect for the purposes of this Part as it may apply to the certified television programme as a film.
1179EA Meaning of “production activities”, “principal photography” and “animation”
(1) “Production activities”, in relation to a film or television programme, means the activities involved in development, pre-production, principal photography and post-production of the film or programme.
(2) “Principal photography”, in relation to a film or television programme, includes the generation of images by a computer for inclusion in the film or programme.
(3) A film or television programme is an “animation” if (and only if)—
(a) the imagery of the completed film or programme includes animation, and
(b) the core expenditure on the completed animation constitutes at least 51% of the total core expenditure on the completed film or programme.
(1) A film is “completed” when it is first in a form in which it can reasonably be regarded as ready for copies of it to be made and distributed for presentation to the general public.
(2) A television programme is “completed” when it is first in a form in which it can reasonably be regarded as ready for broadcast to the general public.