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The following two examples illustrate how CTA2009/Part 15 Chapter 2 apply in calculating the profits/losses of a film production company (FPC) producing a film over one and two accounting periods.

Example 1

An FPC is commissioned by a studio to make a film for an agreed budget of £15.2³¾ and agrees to sell all the rights in the film to the studio for £15.5³¾. The film is completed within a single accounting period. The film is not eligible for Film Tax Relief (FTR).

For the purposes of CTA2009/Part 15 Chapter2 the FPC’s profit from the trade of producing the film is £0.3m (£15.5 - £15.2³¾).

Example 2

The situation is similar to Example 1 but the film takes longer to complete.

An FPC is commissioned by a studio to make a film for an agreed budget of £15.2³¾ and agrees to sell all the rights in the film to the studio for £15.5³¾. At the end of the first accounting period the FPC has spent £10³¾, and in the second it spends a further £5.2³¾. The film is not eligible for Film Tax Relief (FTR).

The profits in each accounting period are calculated as follows:

Period 1

-	Period 1 total	Notes
Expenditure incurred by end of period	£10³¾	Out of total expected costs of £15.2³¾
Income treated as earned by end of period	£10.2³¾	Expected total income of £15.5³¾. The extent to which this is allocated to Period 1 mirrors the extent to which total expected costs fall within Period 1: £10.2 = £15.5³¾ x £10³¾/£15.2³¾
Profit	£0.2³¾	-

Period 2

-	Period 2 total	Increase compared with Period 1	Notes
Expenditure incurred by end of period	£15.2³¾	-	-
Increase in expenditure incurred over previous period	-	£5.2³¾	£15.2³¾ less £10³¾
Income treated as earned by end of period	£15.5³¾	-	-
Increase in income treated as earned over previous period	-	£5.3³¾	£15.5 less £10.2³¾
Profit	-	£0.1³¾	-