CREC034000 - Taxation: preliminary expenditure
Section 1179BD Corporation Tax听Act (CTA)听2009听
If a company intends to claim听an Audio-Visual or Video Games Expenditure Credit (AVEC or VGEC)听in respect of a film, TV programme听or video game, the production is treated as a separate trade. This isolates the development of each individual production for the purpose of calculating profits or losses.听
For many productions, the separate trade commences听when pre-production begins (for films and TV programmes)听or design begins (for video games)听鈥� see CREC031200. There will often be expenditure on the production that has been incurred prior to the commencement of the trade.听
Where a production company is a Special Purpose Vehicle (SPV) set up especially to run a single production, the preliminary work will be bought by the SPV,听or its value will be transferred in after the trade has commenced.听It will therefore automatically be treated as an expense of the trade after it has commenced.听
Where the preliminary work is instead done by the production company听itself prior to the commencement of the trade, this preliminary听expenditure can be transferred to the separate trade.听The听expenditure is treated as having been incurred by the separate trade on the day that it听commences.听
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Preliminary expenditure already included in company tax returns听
Preliminary听expenditure may have been incurred some time before the trade commences. The expenditure may already have been reflected in the company鈥檚 accounts and tax computations.听However, the听expenditure properly relates to the production trade, so where this is the case, the company must amend its previous听tax return(s).听
The normal time limits for amending returns and assessments are specifically overridden by the Part 14A听rules to allow companies to do this听鈥� the legislation is in section 1179AC CTA 2009.听