CREC063300 - Expenditure credit calculation: examples: multi-period production 2
Introduction
Company C is producing an independent film (CREC021100). In the first two accounting periods, AP1 and AP2, it calculates its expenditure credits as follows.
AP1
| Description | Amount (£) |
|---|---|
| Total expenditure to date | 10,000,000 |
| Core expenditure to date | 9,500,000 |
| Excluded expenditure to date | 0 |
| Non-UK core expenditure to date | 500,000 |
| Qulaifying expenditure to date in last period in which a claim was made | n/a |
Note: ‘to date’ means up to the end of the accounting period to which the claim relates.
Step 1 - Find the amount of relevant global expenditure
Relevant global expenditure must be expenditure which is brought into account as part of the separate trade, is core expenditure and is not excluded expenditure.
There is no excluded expenditure, so assuming that all of Company B’s core expenditure has been brought into account as part of total expenditure, relevant global expenditure is £9,500,000.
Step 2 – Deduct non-UK expenditure from the result of step 1
Assuming that all of Company B’s non-UK expenditure is core expenditure:
£9,500,000 - £500,000 = £9,000,000
UK expenditure is therefore £9,000,000.
Step 3 – Find the lesser of UK expenditure and 80% of relevant global expenditure
UK expenditure (the result of step 2) = £9,000,000
80% of relevant global expenditure = £9,500,000 x 80% = £7,600,000
The lesser amount (£7,600,000) is ‘qualifying expenditure to date’.
Step 4 – Deduct ‘qualifying expenditure to date’ in the last period in which the company claimed a credit from ‘qualifying expenditure to date’ in the current period
Because this is the company’s first claim for this production, there is no need to do anything at this step. ‘Qualifying expenditure for the period’ is equal to ‘qualifying expenditure to date’: £7,600,000.
Step 5 – Multiply ‘qualifying expenditure for the period’ by the relevant percentage
Because Company C is making an independent film, the relevant percentage is 53%.
The amount of credit to which Company C is entitled for AP1 is £7,600,000
x 53% = £4,028,000
AP2
| Description | AP1 amount (£) | AP2 amount (£) | Total to date (£) |
|---|---|---|---|
| Total expenditure | 10,000,000 | 8,000,000 | 18,000,000 |
| Core expenditure | 9,500,000 | 6,500,000 | 16,000,000 |
| Excluded expenditure | 0 | 0 | 0 |
| Non-UK core expenditure | 500,000 | 6,500,000 | 7,000,000 |
| Qualifying expenditure to date in last period in which a claim was made | n/a | 7,600,000 | - |
Note: 'to date’ means up to the end of the accounting period to which the claim relates. Therefore, in the second AP it includes all the expenditure from both AP1 and AP2.
Step 1 - Find the amount of relevant global expenditure
Again, there is no excluded expenditure. Assuming again that all core expenditure has been brought into account as part of total expenditure, relevant global expenditure would ordinarily be £16,000,000.
However, independent films are capped so that no more than £15,000,000 relevant global expenditure can be included at step 1 of the credit calculation (CREC061100). Relevant global expenditure is therefore restricted to £15,000,000.
Step 2 – Deduct non-UK expenditure from the result of step 1
UK expenditure is assumed to count towards the £15m cap before non-UK expenditure. Therefore, the £15,000,000 relevant global expenditure from step 1 is made up of the £9,000,000 UK expenditure incurred to date and £6,000,000 non-UK expenditure.
The other £1,000,000 of non-UK core expenditure is the amount restricted by the cap and excluded from the credit calculation.
Therefore, the step 2 calculation is:
£15,000,000 - £6,000,000 = £9,000,000
So, UK expenditure is £9,000,000.
Step 3 – Find the lesser of UK expenditure and 80% of relevant global expenditure
UK expenditure (the result of step 2) = £9,000,000
80% of relevant global expenditure = £15,000,000 x 80% = £12,000,000
The lesser amount (£9,000,000) is ‘qualifying expenditure to date’.
Step 4 – Deduct ‘qualifying expenditure to date’ in the last period in which the company claimed a credit from ‘qualifying expenditure to date’ in the current period
The most recent period in which Company C claimed a credit was the previous period, AP1. ‘Qualifying expenditure to date’ in AP1 was £7,600,000.
£9,000,000 - £7,600,000 = £1,400,000
‘Qualifying expenditure for the period’ is therefore £1,400,000.
Step 5 – Multiply ‘qualifying expenditure for the period’ by the relevant percentage
The relevant percentage is still 53%.
The amount of credit to which Company C is entitled for AP2 is £1,400,000 x 53% = £742,000