TPC20510 - Taxation: examples 1 and 2: one-period and two-period productions
The following two examples illustrate how Part 15A Corporation Tax Act 2009 applies in calculating the profits/losses for the separate programme trade of a Television Production Company (TPC) producing a programme over one and two accounting periods.
In the examples, none of the costs are disallowed under the Taxes Acts.
Example 1
A TPC is commissioned by a broadcaster to make a television programme for an agreed budget of 拢1.52尘 and agrees to sell all the rights in the programme to the broadcaster for 拢1.55尘. The television programme is completed within a single accounting period. The programme is not eligible for Television Tax Relief but the tax regime for calculating the profits and loss of a TPC nevertheless applies.
For tax purposes the TPC鈥檚 profit from the trade of producing the programme is 拢30k (拢1.55尘 - 拢1.52尘).
Example 2
The situation is similar to Example 1 but the programme takes longer to complete.
A TPC is commissioned by a broadcaster to make a programme for an agreed budget of 拢1.52尘 and agrees to sell all the rights in the programme to the broadcaster for 拢1.55尘. At the end of the first accounting period the TPC has spent 拢1尘, and in the second it spends a further 拢5.2m. The programme is not eligible for TTR but the tax regime for calculating the profits and loss of a TPC nevertheless applies.
The profits in each accounting period are calculated as follows:
Period 1
| - | Amount | Notes |
|---|---|---|
| Expenditure incurred by end of period | 拢1尘 | Out of total expected costs of 拢1.52尘 |
| Income treated as earned by end of period | 拢1.02尘 | Expected total income of 拢1.55尘. The extent to which this is allocated to Period 1 mirrors the extent to which total expected costs fall within Period 1.\n拢1.02尘 = 拢1.55尘 x 拢1尘/拢1.52尘 |
| Profit | 拢0.02尘 | - |
Period 2
| - | Amount | Difference | Notes |
|---|---|---|---|
| Expenditure incurred by end of period | 拢1.52尘 | - | - |
| Increase in expenditure incurred over previous period | - | 拢0.52尘 | 拢1.52尘 less 拢1尘 |
| Income treated as earned by end of period | 拢1.55尘 | - | - |
| Increase in income treated as earned over previous period | - | 拢0.53尘 | 拢1.55 less 拢1.02尘 |
| Profit | - | 拢0.01尘 | - |