SolvedTPC20510 | Taxation: examples 1 and 2: one-period and two-period productions
From HM Revenue & Customs · Television Production Company Manual
The following two examples illustrate how Part 15A Corporation Tax Act 2009 applies in calculating the profits/losses for the separate programme trade of a Television Production Company (TPC) producing a programme over one and two accounting periods.
In the examples, none of the costs are disallowed under the Taxes Acts.
Example 1
A TPC is commissioned by a broadcaster to make a television programme for an agreed budget of £1.52m and agrees to sell all the rights in the programme to the broadcaster for £1.55m. The television programme is completed within a single accounting period. The programme is not eligible for Television Tax Relief but the tax regime for calculating the profits and loss of a TPC nevertheless applies.
For tax purposes the TPC’s profit from the trade of producing the programme is £30k (£1.55m - £1.52m).
Example 2
The situation is similar to Example 1 but the programme takes longer to complete.
A TPC is commissioned by a broadcaster to make a programme for an agreed budget of £1.52m and agrees to sell all the rights in the programme to the broadcaster for £1.55m. At the end of the first accounting period the TPC has spent £1m, and in the second it spends a further £5.2m. The programme is not eligible for TTR but the tax regime for calculating the profits and loss of a TPC nevertheless applies.
The profits in each accounting period are calculated as follows:
Period 1
| - | Amount | Notes |
|---|---|---|
| Expenditure incurred by end of period | £1m | Out of total expected costs of £1.52m |
| Income treated as earned by end of period | £1.02m | Expected total income of £1.55m. The extent to which this is allocated to Period 1 mirrors the extent to which total expected costs fall within Period 1.\n£1.02m = £1.55m x £1m/£1.52m |
| Profit | £0.02m | - |
Period 2
| - | Amount | Difference | Notes |
|---|---|---|---|
| Expenditure incurred by end of period | £1.52m | - | - |
| Increase in expenditure incurred over previous period | - | £0.52m | £1.52m less £1m |
| Income treated as earned by end of period | £1.55m | - | - |
| Increase in income treated as earned over previous period | - | £0.53m | £1.55 less £1.02m |
| Profit | - | £0.01m | - |