APC50070 - Eligible expenditure: UK expenditure: services not directly related to a single territory
S1216AH, S1216CG Corporation Tax Act 2009
The amount of Television Tax Relief (TTR) to which a Television Production Company (TPC) is entitled in respect of an animation trade is determined by the amount of core expenditure which is used or consumed in the UK.
In the case of some services, it may not be obvious where services are used or consumed. This is most common at the pre-production stage where there are disparate or intangible outputs from production activities. Generally these are services:
- which do not involve, or are not directly linked to, principal photography, or
- where the location of a performance is difficult to determine.
These include services provided by the director, screenwriter, composer, animators, artists, designers and researchers.
Services provided by these individuals can be used or consumed in more than one way. For example, a script or storyboard is used for directing individual performances and principal photography. This will include performances given through animators, artists, designers, technicians and actors.
However, it will also be used intensely in pre-production work and for vocal rehearsals.
In every case, it is essential to consider the facts to determine whether goods and services are used or consumed in the UK. It may be necessary to apportion costs on a fair and reasonable basis where there is more than one location.
Example 1: Screenwriter
A TPC decides to make an animated series of a book. It holds the filming rights and enlists a screenwriter to prepare initial drafts of a screenplay and to rework them into a script to form the basis of filming.
The nature of the service provided is the provision of a script. This is separate from story-boards and initial animations.
The script is used as follows:
| Activity | Location |
|---|---|
| Preparing costings, producing storyboards and scheduling | UK |
| Rehearsals | Overseas |
| Principal photography | UK |
| Post-production | Part UK, part overseas |
The post-production work involves the recording of a voiceover which is performed and integrated into the master-recording in an overseas studio.
In this instance, the script cannot be regarded as being entirely used or consumed in the UK. A fair and reasonable apportionment will be required between UK expenditure and overseas expenditure. The basis of allocation might take the form of a time apportionment based on the duration of activities using the script.
The location that the script was written in and the residence of the screenwriter are not considerations in whether the expenditure is UK expenditure.
Example 2: Voice/dialect coach
An American actor is to play a leading role in an animation where the production takes place entirely in the UK.
The nature of the service is that of coaching the actor. That service is consumed by the actor wherever the actor is.
If the actor is in the United States, the expenditure is not UK expenditure. This remains so even if the coaching is delivered remotely from the UK.
Likewise, if the actor is located in the UK when the coaching is given, the point of consumption is in the UK, regardless of the location of the coach.