Qualifying animations: intended for broadcast
S1216CA Corporation Tax Act 2009
For a programme to qualify for Television Tax Relief (TTR) for a particular accounting period, it must be intended, when production activities begin, for broadcast. If it is not so intended, then it cannot qualify for TTR for that or any subsequent accounting period. However, if the programme has been previously intended for broadcast any relief given for previous periods is not withdrawn.
‘Broadcast’ means being broadcast on television, or via the internet, to the general public.
If a programme is not originally intended for broadcast, a Television Production Company (TPC) cannot meet this condition by changing its intention to broadcast the programme to the general public. Where a programme is developed with the intention of only being used for private broadcast (such as internal training purposes) then the programme will not qualify.
However, if a new programme is developed with the intention of broadcast, then that programme may qualify for TTR. The costs associated with the precursor programme not intended for broadcast will not qualify.
Not only did the precursor not meet the criteria for broadcast, it precedes the decision to proceed with the new programme and therefore would only constitute development costs of the new programme. The costs would therefore not be eligible.
Certification and intention for broadcast
The fact that a programme is certified as British does not affect whether it is intended for broadcast. The Department for Culture, Media and Sport will certify programmes that are not so intended.
A programme may qualify as ‘intended for broadcast’ even if the intention is to gain a significant proportion of the earnings from broadcast overseas, rather than in the UK - although a British programme would normally be expected to be intended for UK broadcast.
The legislation does not specify whose ‘intention’ this should be. But at any time there will normally be someone entitled to determine how the programme is to be exploited. This would generally be the person who commissioned it - if a company, the directors of that company - but there may be cases where someone else has a prior claim.
It is not necessary for the programme to actually be broadcast on television or via the internet to meet this condition. However, if it was not so broadcast, the question obviously arises of whether it was ever so intended (and if so, when the intention changed).
If there is any doubt about the intention, the following factors may count in favour of the programme being intended for broadcast:
- a finance plan written on the basis that the programme will be broadcast,
- a programme of a type commonly broadcast,
- production in a format suitable for broadcast,
- payment to animators, actors and other participants on terms in line with those prevailing for animations,
- the relevant person can demonstrate that, when television production activities began, there was an intention to seek a contract for broadcast of the programme.
Television Productions not intended for broadcast
Where the production is commissioned by a film company with the intention for theatrical release, or is clearly more suited to some distribution channel other than television or the internet, these conditions may not be met. This will be the case even if the programme is eventually shown on television.
For example, where a programme is intended for sale on DVD initially or for sale specifically as an internet download (e.g. from an on line store) and ultimately is shown on television, the conditions would still not be met.
It may not be readily apparent whether a feature-length animation is intended for broadcast on television or intended for theatrical release as a film. There may be more than one contingency plan for exploitation of the film. This means that the animation might conceivably be eligible for Film Tax Relief (FTR) or TTR.
In such a circumstance it is not possible to claim both FTR and TTR.
The intention must be categorically for broadcast or for theatrical release. This will be a question of fact and it cannot be both. The decision to seek the relevant certification, and claim one relief over the other, will provide strong evidence of which contingency is truly intended.
However, the conditions for the two reliefs are different and a company may be eligible for one relief and not another. It is therefore essential that the facts of each situation are considered in full.