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S1216CG Corporation Tax Act 2009

A Television Production Company (TPC) entitled to Television Tax Relief (TTR) can claim an additional deduction in computing the taxable profits of a programme trade.

The effect of the additional deduction is to increase the level of expenditure for tax purposes. This decreases the amount of Corporation Tax which would otherwise be payable. It may also create a loss, or greater losses, which are then available to be surrendered for the payable credit.

Example: Production completed in single period

A TPC makes a qualifying British programme for 拢3m, all of which is UK core expenditure. It retains and exploits the programme in the UK, receiving income of 拢6m and therefore generating a profit of 拢3m on which it would normally pay Corporation Tax. The company is subject to Corporation Tax at a rate of 23%. The programme is completed within a single accounting period.

Expenditure on the programme is eligible for TTR. The TPC is entitled to an additional deduction in computing its profits/losses from the separate trade relating to the production of the programme. Since all of the core expenditure is UK expenditure, the additional deduction is calculated by reference to 80% of the total core expenditure. So in this example

• Income is 拢6m
• Expenditure is (拢3m)
• Trading profit before TTR is 拢3m
• Enhanceable expenditure (80% of UK core expenditure of 拢3m) is (拢2.4m)
• Additional deduction (enhanceable expenditure of 拢2.4m x 100%) is (拢2.4m)
• Trading profit after TTR is 拢600k

Without TTR, the TPC would have been liable to pay Corporation Tax of 拢690,000 (23% x the pre-TTR profit of 拢3m).

TTR reduces the Corporation Tax liability to 拢138,00 (23% x the adjusted profit of 拢600k), thereby gaining a benefit of 拢552,000.

In this case, the TTR is worth 18.4% of the total core expenditure (TPC50010).