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This example shows how Part 15A Corporation Tax Act 2009 operates to arrive at the profits/losses of a Television Production Company (TPC) producing an animation whose production spans several years. Animated programmes, and those using computer-generated imagery (CGI), may take a considerable number of years to complete and may have a non-linear cost profile.

An animation production company makes a programme costing £3 million that takes four years to complete. The cumulative costs at the end of each accounting period are £500k, £1.5 million, £2.5 million, and £3 million. The programme is not eligible for Television Tax Relief (TTR).

The company finances the programme by selling some rights to a distributor for £2 million at the start of television production. Further rights are sold for £1 million in Period 2 and £0.2 million in Period 4. On completion, the residual rights are sold for £0.2 million in Period 5. Total costs are therefore £3 million, with total income of £3.4 million, giving an overall profit of £400k.

Unlike Examples 1-3, where a contract has been agreed for the sale of the production as a whole (so that, although the payments are received in stages, the overall amount is certain, and must be taken into account from the start) we now have a number of separate sales of rights throughout the project. Until each has been agreed, it is not reflected in the profit. This judgement needs to be made at the end of each period.

The calculation of profits on the programme is as follows:

Period 1

-	Amount	Notes
Expenditure incurred by end of period	£0.5³¾	Out of total expected costs of £3³¾
Income treated as earned by end of period	£0.333³¾	Expected total income of £2m. The extent to which this is allocated to Period 1 mirrors the extent to which total expected costs fall within Period 1. (£0.333³¾ = £2m x £0.5³¾/£3³¾)
Profit (loss)	(£0.166³¾)	-

Period 2

-	Amount	Difference	Notes
Expenditure incurred by end of period	£1.5³¾	-	-
Increase in expenditure incurred over previous period	-	£1³¾	£1.5³¾ less £0.5³¾
Income treated as earned by end of period	£1.5³¾	-	Estimated total income has risen to £3³¾, and costs incurred represent £1.5³¾ out of expected total costs of £3³¾
-	-	-	£1.5³¾ = £3³¾ x £1.5³¾/£3³¾
Increase in income treated as earned over previous period	-	£1.166³¾	£1.5³¾ less £0.333³¾
Profit	-	£0.166³¾	This profit would be eliminated by the brought forward trade losses from period 1

Period 3

-	Amount	Difference	Notes
Expenditure incurred by end of period	£2.5³¾	-	-
Increase in expenditure incurred over previous period	-	£1³¾	£2.5³¾ less £1.5³¾
Income treated as earned by end of period	£2.5³¾	-	Estimated total income remains £3³¾, and costs incurred represent £2.5³¾ out of expected total costs of £3³¾
-	-	-	£2.5³¾ = £3³¾ x £2.5³¾/£3³¾
Increase in income treated as earned over previous period	-	£1³¾	£2.5³¾ less £1.5³¾
Profit	-	£²Ô¾±±ô	-

Period 4

-	Amount	Difference	Notes
Expenditure incurred by end of period	£3³¾	-	-
Increase in expenditure incurred over previous period	-	£0.5³¾	£3³¾ less £2.5³¾
Income treated as earned by end of period	£3.2³¾	-	Estimated total income has risen to £3.2³¾, and all expected costs now incurred
-	-	-	£3.2³¾ = £3.2³¾ x £3³¾/£3³¾
Increase in income treated as earned over previous period	-	£0.7³¾	£3.2³¾ less £2.5³¾
Profit	-	£0.2³¾	-

Period 5

-	Amount	Difference	Notes
Expenditure incurred by end of period	£3³¾	-	-
Increase in expenditure incurred over previous period	-	£0³¾	£3³¾ less £3³¾
Income treated as earned by end of period	£3.4³¾	-	Estimated total income has risen to £3.4³¾; all costs incurred
-	-	-	£3.4³¾ = £3.4³¾ x £3³¾/£3³¾
Increase in income treated as earned over previous period	-	£0.2³¾	£3.4³¾ less £3.2³¾
Profit	-	£0.2³¾	-