CREC061300 - Expenditure credit calculation: step 5
S1179CA CTA 2009
Multiply qualifying expenditure for the period by the relevant percentage.
The result is the amount of expenditure credit to which the company is entitled for the accounting period in respect of the production.
The relevant percentage is:
Type of production |
Relevant percentage |
Animated films |
39% |
Other films |
34% |
Animated TV programmes |
39% |
Children’s TV programmes |
39% |
High-end TV programmes |
34% |
Video games |
34% |
Examples
Company A has incurred qualifying expenditure for the period of £300,000 on an animated TV programme. It is therefore due an expenditure credit of £300,000 x 39% = £117,000.
Company B is producing a video game and has incurred £20,000 qualifying expenditure for the period. It is therefore due an expenditure credit of £20,000 x 34% = £6,800.
Switching between different types of production – effect on relevant percentage
If a company makes a claim for a production which has a relevant percentage of 34%, it cannot later make a claim for the same production at a relevant percentage of 39%. All future claims for the same production must be made at a relevant percentage of 34%, regardless of the type of production.
Example
Company C is producing a film. The film is live action, so it has a relevant percentage of 34%. The company makes a claim in an accounting period (AP1) using 34% at step 5.
In the next accounting period (AP2), Company C makes a deal with an online streamer, meaning the film is now a TV programme instead. The film was originally (and is still currently) aimed at children, so it now meets the definition of a children’s TV programme.
Children’s TV programmes usually have a relevant percentage of 39%. However, because Company C previously made a claim using the 34% rate in AP1, it must use the 34% rate again in AP2 and all subsequent accounting periods.
If a company makes a claim for a production type that has a relevant percentage of 39%, on the basis that it is an animated film, animated TV programme or children’s TV programme, it cannot later make a claim for the production on the basis that it is any other type of film or TV programme.
This means that if the production type changes from one with a 39% rate to one with a 34% rate and a claim was previously made using the 39% rate, no relief is available in subsequent periods.
However, the company can make a claim using the 34% rate in later periods if it amends its earlier tax return(s) to remove any claims using the 39% rate. Amendments made for this purpose can be made at any time, ignoring the normal time limit for amendments.
Example
Company D is producing an animated film. In its first accounting period (AP1), it makes a claim using the relevant percentage of 39%. It makes another claim in the next period (AP2), again using 39% at step 5.
In the next accounting period (AP3), Company D’s plans change, and it decides to transition the production into a live action film. Because it has previously claimed a credit on the film on the basis that it is an animated film, Company D cannot claim on the same production as a live action film.
No amount of expenditure credit is due in AP3 or any subsequent accounting period, unless Company D amends its tax returns for AP1 and AP2 to remove the claims made at 39%. It can then make a claim for AP3, covering all qualifying expenditure incurred to date in all three APs and using the 34% rate at step 5.