188ÌåÓý

Meaning of ‘animationâ€�Ìý

Section 1179EA Corporation Tax Act 2009

A TV programmeÌýis an animation if (and only if):Ìý

The 51% test takes all core expenditure into account, both UK expenditure and non-UK expenditure.Ìý
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SubsequentÌýseriesÌýof TV programmesÌý

The previousÌýqualification of an earlier series is no guarantee that the 51% threshold is met. This is because some core expenditure for animation may not need to be duplicated in subsequentÌýseries.Ìý

A programmeÌýthat was an animation may cease to be a qualifying animation between series.Ìý

Ìý

The following guidance applies to animated films as well as animated TV programmesÌý

Animation costsÌý

The term ‘animationâ€� is not itself defined within the legislation. It is therefore given its ordinary meaning.Ìý

An animation may be generated by various techniques including, but not limited to:Ìý

Core expenditure which relates to this will count towards animation production expenditure. Any expenditure incurred in order toÌýproduce the animation will also be included, such as the costs of motion capture and voice artists.Ìý

Mixed animationsÌý

Where a production mixes animation and live action, theÌýproduction company will need to consider whether 51% of the total core expenditure is incurred on animation.Ìý

There will be costs which relate purely to the live action element and costs which relate purely to the animation element. Once these have been identified, there will remain elements which relate to both.Ìý

This will include many fundamental costs of production, such as screenplay and script, soundtracks and so on. There will probably beÌýdedicated crew for the separate methods, but there will be members of the production crew who span both operations.ÌýThis may include actors,Ìýwho might provide a live action performance in addition to a vocal performance for the purposes of the animation.Ìý

In all cases, a fair and reasonable apportionment will need to be made on the basis of the specific facts.Ìý

For example, if a mixed media production has a single director for both the live action and animated elements, it would be reasonable to apportion the director’s fee based on time spent working on each element.Ìý

Alternatively, costs which relate to the whole production could be apportioned based on the ratio of core costs not related to animation vs core costs solely related to animation.Ìý

ExampleÌý

A company has a productionÌýwhich is a mix of live action and animated sequences. The core costs that relate exclusivelyÌýto animation are £1 million and the costs that relate exclusively to the live action sequences are £500,000. The ratio of animation costs to non-animation costs is therefore 2:1.Ìý

The company paid a scriptwriter £60,000 for a script for the whole production. It would be reasonable to apportion the scriptwriter’s fee based on the ratio above and assign £40,000 to animation costs and £20,000 to non-animation costs.Ìý