CREC037200 - Taxation: expenditure: timing
Where the separate trade rules in Chapter 2 Part 14A Corporation Tax Act (CTA)听2009 are applied to a production, the costs of production are recognised听when they are represented in the state of completion of the film, TV programme听or video game. In particular,听
prepayments (where payments are made in advance of the goods or services being supplied) are not recognised听until the work has been done; and听
deferrals (where work is done or services supplied for promise of payment in the future) are recognised听earlier, when the work is done (so long as the obligation of future payment is unconditional).
Participations and contingent fees听
In the film, TV听and video game industries, payment for goods and/or services is sometimes contingent on the production making a profit. Effectively, the amount the supplier is to be paid is linked to the success of the project and they will only begin to be paid these amounts when the production generates sufficient income.听In that case, the costs are recognised听if, or when, the income on which they are to be based is also recognised.听
Expenditure credits due or paid to the production company are not considered to be income for the purpose of this rule.听A payment that is contingent on the production company receiving听an expenditure credit听is recognised听according to the usual rule: when the work it relates to is done.听