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HMRC internal manual

Animation Production Company Manual

Taxation: separate trade - pre-trading expenditure

S1216BE Corporation Tax Act 2009 (CTA 2009)

Where a company is a Television Production Company (TPC) (APC10110) for the purposes of Part 15A CTA 2009, the production of each animation (APC10100) is treated as a separate trade. This isolates the development of each animation on an individual basis for the purpose of calculating profits and losses.

For an animation that enters pre-production, there will often be expenditure that has been incurred prior to the commencement of the animation’s separate trade - see APC20100.

Where a company is set up especially to produce the animation, the preliminary work will be bought by the TPC or its value will be transferred in after the trade has commenced.

Where the preliminary work is instead done by the TPC prior to the commencement of the trade, this pre-trading expenditure can be transferred to the trade. This expenditure is treated as having been incurred by the trade of producing the animation on the day the trade commences.

This pre-trading expenditure may have been incurred some time before the trade commences. The expenditure may already have been reflected in the company’s accounts and tax computations.

However, this expenditure relates to the production of the animation. All returns which reflect expenditure which was previously recognised must be amended. The normal time limits for amending returns and assessments are specifically overridden by the Television Tax Relief rules to allow it to do so.