CREC026000 - Qualifying productions: switching between theatrical release and broadcast intention
Section 1179E Corporation Tax Act (CTA) 2009
The theatrical release condition and the broadcast condition are tested for each accounting period, based on the intention for the production at the end of that period. If they are not met for an accounting period, an Audio-Visual Expenditure Credit (AVEC) cannot be claimed for that period or any subsequent period.
However, AVEC gives flexibility where the intention changes partway through production. If a production does not meet the theatrical release condition for an accounting period because the intention has changed to broadcast, or vice versa, the production’s eligibility for relief is uninterrupted.
Assuming all other criteria for the new type of production are met, a film or TV programme will only fall out of eligibility for relief if, at the end of an accounting period,
there is no intention for theatrical release, and
there is also no intention for broadcast
Note that there is no restriction on the type of production that is switching. Any type of TV programme can meet the theatrical release condition instead of the broadcast condition: high-end TV, animated programmes and children’s programmes.
Example
A film studio begins work on a feature-length animated production which it intends to release as a film in cinemas. It expects to make most of the money from the film from this release. At the end of the first accounting period, the plan is unchanged, and the theatrical release condition is therefore met.
During the second accounting period, a streaming company acquires the studio and all its productions. The streaming company decides to release the film on its streaming platform, with no cinema showings. By the end of the second accounting period, there is no longer any intention to release the film in cinemas, so the theatrical release condition is no longer met. However, the film is still eligible for AVEC because the broadcast condition is met instead and it meets the other qualifying criteria for animated TV programmes (for which see CREC022000 and CREC024000).
Effect on treatment of production
Productions which switch from theatrical release intention to broadcast intention and vice versa are treated as if they have swapped production type entirely, except for the BFI certificate required (for which see below).
A TV programme which later meets the theatrical condition instead is treated as a film for any accounting period in which it relies on the theatrical release condition to qualify. This means it only needs to meet the qualifying criteria for films and not the criteria for TV programmes.
Likewise, a film which later meets the broadcast condition instead is treated as a TV programme for any accounting period in which it relies on the broadcast condition to qualify. This means it needs to meet the qualifying criteria for TV programmes and not the criteria for films.
Companies must complete an additional information form before submitting a claim for AVEC and VGEC (CREC081000). The form asks the company to identify the type(s) of production it is claiming for. If a production has switched, the company should fill out the form using the new type of production.
BFI certificates
A production which switches from film to TV or vice versa can continue to rely on any BFI certificate that has already been issued in respect of it. The production company does not need to revoke the original certificate or apply for a new one. However, when it comes to final certification, the company should apply for the cultural test that applies to the current type of the production.
For example, if the production company for the film in our earlier example had already obtained an interim film certificate for the production, it could claim AVEC on the production as a TV programme using that certificate. Once production is complete, the company should apply for a final certificate under the cultural test for TV programmes.
Switching between different types of production – effect on rate of credit
Switching from film to TV programme and vice versa may effect the percentage of qualifying expenditure the production receives as a credit, depending on whether the production was originally in a higher rate category. Please see CREC061300 for details.
If both conditions are met
Where a production is capable of satisfying both the theatrical release and broadcast conditions at the end of an accounting period, the theatrical release condition takes precedence and the production is treated as a film. This means it only needs to meet the qualifying criteria for films and not the criteria for TV programmes. This would be the case if, for example, a production was expected to have a full theatrical run followed by a release on a streaming site.