CREC062000 - Expenditure credit calculation: long periods of account
Periods of account and accounting periods
A period of account is the period for which a company draws up a set of accounts. Although accounts are typically drawn up to the same date each year, a period of account may be shorter or longer if the company wishes.
An accounting period is the period covered by a company’s CT600 tax return. It cannot be longer than 12 months, so if a company has a period of account that is over 12 months long, it must split it into two or more accounting periods for tax purposes. The company should apportion profit/loss and other amounts between each accounting period.
Effect on time limit
The time limit to make a claim is different for some companies with a long period of account.
If the company has a period of account which is up to 18 months long, the time limit to make a claim is two years from the end of the period of account.
If the company has a period of account which is longer than 18 months, the time limit is 42 months from the beginning of the period of account.
Example
Company A has a period of account which begins on 1 January 2026 and ends on 31 December 2026, making it 12 months long. The time limit to make a claim in relation to Company A’s period of account is 2 years from the end of the period, which would be 31 December 2028.
Company B has a period of account which begins on 1 January 2025 but does not end until 31 October 2026, making it 22 months long. As Company B’s period of account is longer than 18 months, the time limit to make a claim is 42 months from the beginning of the period, which would be 1 July 2028.
Profit calculation – for each period of account
The profit or loss of each separate production trade must be calculated for each period of account. This means that, if a company must split a period of account into multiple accounting periods because it is over a year long, the profit or loss must be apportioned between the accounting periods. Apportionment is based on the number of days in each accounting period compared to the whole period of account.
For example, if an accounting period covers 200 days of a period of account which is 450 days long, the profit for that accounting period would be the profit for the whole period of account, multiplied by (200÷450). There is a full example below.
Expenditure credit calculation – for each accounting period
Unlike the profit/loss of the separate trade, the amount of expenditure credit to which a production company is entitled is calculated separately for each accounting period.
Because the Creatives Expenditure Credits are above-the-line credits taxable as income, the expenditure credit to which a company is entitled for a production must be added as a credit (i.e. as if it were income) to the profit/loss of the production’s separate trade in respect of the accounting period to which it relates.
For a company with a long period of account, which has apportioned profit/loss into multiple accounting periods as described above, the credit for each accounting period should be added on after apportionment.
Example
Company C has a 15-month long period of account from 1 January 2024 to 31 March 2025. Because the period of account is over 12 months long, Company C must split it into accounting periods of no more than 12 months each.
Company C therefore has two accounting periods for its period of account:
AP1, for the 12 months from 1 January 2024 to 31 December 2024
AP2, for the remaining 3 months from 1 January 2025 to 31 March 2025
Company C has a profit of £100,000 for its period of account, which it has apportioned between the two accounting periods as follows:
AP1: £100,000 x (366/456) = £80,263
AP2: £100,000 x (90/456) = £19,737
The expenditure credit is calculated separately for each accounting period. Company C calculates that it is due expenditure credits of £25,000 for AP1 and £15,000 for AP2. Company C must add these amounts to the apportioned profits for each accounting period. It must not add on the expenditure credits before apportioning the profits.
Therefore,
Profit for AP1 = £80,263 + £25,000 credit = £105,263
Profit for AP2 = £19,737 + £15,000 credit = £34,737
Tax returns and additional information forms
If a company has a long period of account that it has split into multiple accounting periods, it must complete a separate Creatives Expenditure Credit claim for each accounting period and make the claims in the usual way using the CT600 tax return for each accounting period (CREC084000).
Companies must also submit an additional information form (CREC081000) for every accounting period. The form must be submitted to HMRC either before or on the same day the CT600 is submitted, otherwise the claim is invalid.