CREC061300 - Expenditure credit calculation: step 5

Section 1179CA Corporation Tax Act 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% 
Independent films (a.k.a. certified low-budget films)  53%

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

Productions with an original relevant percentage of 34%

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% or 53%. All future claims for the same production must be made at a relevant percentage of 34%, regardless of the type of production, unless the company withdraws its original 34% claim. The normal time limits to withdraw a claim apply (CREC085000).

Example

Company C is producing a film. The film is live action and is not an independent film, 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 to exclusively release the film on its streaming platform, meaning the film is now treated as 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.


Productions with an original relevant percentage of 39%

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% or 53% 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% or 53% 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.


Productions with an original relevant percentage of 53%

Lastly, if a company makes a claim for an independent film at the relevant percentage of 53% and later switches to any other production type with a different relevant percentage, any claims at 53% must be withdrawn and a cumulative claim must be made at the new relevant percentage (34% or 39%), covering all qualifying expenditure incurred to date.

Example

Company E is producing a live action film with a UK director and anticipates that the total core expenditure on the film will be £22m. This means the film meets the creative connection condition and the budget condition and qualifies as an independent film (CREC021100). The company therefore makes a claim at 53% in its first accounting period (AP1).

In the next period (AP2), the company incurs unexpected additional costs which mean that the total core expenditure on the film is now anticipated to be £24m, which is above the limit for the budget condition. The film is no longer an independent film and now has a relevant percentage of 34%.

Company E must withdraw its original claim for AP1 and make a claim for AP2 covering the qualifying expenditure of both AP1 and AP2. The AP2 claim must use the new relevant percentage of 34%.

Note: if the film had been animated instead of live action, the new relevant percentage would be 39%.