TPC50130 - Eligible expenditure: ineligible expenditure

S1216CF Corporation Tax Act 2009

Television Tax Relief (TTR) in respect of a television programme trade by a Television Production Company (TPC) is only available on elements of core expenditure (TPC50010) which is also UK expenditure.

Completion bond and other forms of insurance

Completion bonds are a form of insurance against the risk that a programme may not be completed. Costs of the completion bond do not qualify for TTR. They are not incurred on television production activities.

Other forms of insurance, more directly concerned with the television production activity itself, may qualify. These will be insurance costs that are allowable core expenditure that is also UK expenditure. So expenditure related to individuals or equipment that are UK expenditure during production will be eligible expenditure.

Development costs

See TPC50120 - these costs are not part of core expenditure.

Entertaining

Costs related to hospitality and entertainment are disallowable under normal rules.

Publicity and promotion

Publicity and promotional costs do not qualify for TTR. They are not concerned with the making of the programme.

Audit fees

These do not relate to television production activities. They do not qualify for TTR.

Bank interest and charges

While interest itself is regarded as part of the costs of financing a programme, and therefore not incurred on television production activities, charges incurred by banks for facilities that are needed by the TPC to engage in television production activities are part of the costs of television production. This includes charges associated with the maintenance of a current account from which suppliers, cast and crew can be paid.

Furlough payments, including those met by the Government through the Coronavirus Job Retention Scheme (CJRS)

Tax relief is only available on ‘production expenditure’, which is defined as expenditure on telvision production activities in connection with the programme as per s1216AG(2). ‘Television production activities’ are those involved in development, pre-production, principal photography and post-production of the programme– s1216AF(1). To qualify for an additional deduction, expenditure must also meet the definition of ‘core’ in s1216AG(2): it must be on pre-production, principal photography or post-production.

When a company places an employee on furlough, the employee must cease work. The employee is not carrying out television production activities and is not working on pre-production, principal photography or post-production.

Staffing costs in respect of an employee on furlough are therefore not considered by HMRC to be on television production activities, and do not constitute production expenditure. Such payments are not considered to be costs of the separate television trade and are not eligible for tax relief.  This applies equally to all furlough payments, whether or not they are reimbursed by the CJRS, and includes any ‘top-up’ element. If an employee has been placed on flexible furlough, then any payment in respect of the furloughed time will not be eligible.

Holiday pay and sick pay are statutory requirements. HMRC considers them to be a necessary cost of employing staff and part of the cost of their working time. Any period during furlough which is taken as annual leave or recorded as sick leave is potentially eligible for relief, and should be apportioned in line with work done.