CREC024000 - Qualifying productions: animations

Meaning of ‘animation’ 

Section 1179EA Corporation Tax Act 2009

A TV programme is an animation if (and only if): 

  • the imagery of the completed programme includes animation, and 

  • the core expenditure on the completed animation constitutes at least 51% of the total core expenditure on the completed programme 

The 51% test takes all core expenditure into account, both UK expenditure and non-UK expenditure. 
 

Subsequent series of TV programmes 

The previous qualification of an earlier series is no guarantee that the 51% threshold is met. This is because some core expenditure for animation may not need to be duplicated in subsequent series. 

A programme that was an animation may cease to be a qualifying animation between series. 


 

The following guidance applies to animated films as well as animated TV programmes 

Animation costs 

The term ‘animation’ is not itself defined within the legislation. It is therefore given its ordinary meaning. 

An animation may be generated by various techniques including, but not limited to: 

  • hand-drawn illustrations 

  • digital rendering in 2D or 3D 

  • using photography to generate individual frames as in stop motion 

Core expenditure which relates to this will count towards animation production expenditure. Any expenditure incurred in order to produce the animation will also be included, such as the costs of motion capture and voice artists. 

Mixed animations 

Where a production mixes animation and live action, the production company will need to consider whether 51% of the total core expenditure is incurred on animation. 

There will be costs which relate purely to the live action element and costs which relate purely to the animation element. Once these have been identified, there will remain elements which relate to both. 

This will include many fundamental costs of production, such as screenplay and script, soundtracks and so on. There will probably be dedicated crew for the separate methods, but there will be members of the production crew who span both operations. This may include actors, who might provide a live action performance in addition to a vocal performance for the purposes of the animation. 

In all cases, a fair and reasonable apportionment will need to be made on the basis of the specific facts. 

For example, if a mixed media production has a single director for both the live action and animated elements, it would be reasonable to apportion the director’s fee based on time spent working on each element. 

Alternatively, costs which relate to the whole production could be apportioned based on the ratio of core costs not related to animation vs core costs solely related to animation. 

Example 

A company has a production which is a mix of live action and animated sequences. The core costs that relate exclusively to animation are £1 million and the costs that relate exclusively to the live action sequences are £500,000. The ratio of animation costs to non-animation costs is therefore 2:1. 

The company paid a scriptwriter £60,000 for a script for the whole production. It would be reasonable to apportion the scriptwriter’s fee based on the ratio above and assign £40,000 to animation costs and £20,000 to non-animation costs.