CREC036100 - Taxation: income: nature

Where the separate trade rules in Chapter 2 Part 14A Corporation Tax Act (CTA) 2009 are applied to a production, the income to be brought into account is all the receipts of the trade of making, or making and exploiting, the production. 

This means all the money received from generating income from the production in the widest sense. Income includes (but is not limited to): 

  • receipts from the sale of the production itself, or rights in it, 

  • royalties or other payments for the rights to use the production or aspects of it (for example, characters or music), 

  • payments for rights to produce games or other merchandise, and 

  • receipts by way of a profit share agreement. 

The legislation is in section 1179DX CTA 2009 for films and TV programmes, and section 1179FP for video games. 

Loans and grants 

Receipts such as grants may be income where they are unconditional contributions to the costs of the production. Loans are not trade receipts and, as with any other trade, they are not counted as production income. It may not be obvious whether a receipt is a loan or not. 

Film, TV and video game financing may involve bringing in money from a wide range of sources, and promising investors/contributors a contingent return on their money. Sometimes it may be difficult to decide the character of a receipt or loan. Some funders may impose standard terms, but each receipt will have to be viewed on its own conditions. 

Capital receipts 

If a production company receives income from the production that is deemed to be a capital receipt only because it is income received in respect of a capital asset (that is, the qualifying film, TV programme or video game), it is treated as a revenue receipt and included as income for the purposes of section 1179BB CTA 2009. The legislation is in section 1179BE.