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HMRC internal manual

Animation Production Company Manual

Eligible expenditure: UK expenditure: supply of goods

S1216AH, S1216CG Corporation Tax Act 2009

The amount of Television Tax Relief (TTR) to which a Television Production Company (TPC) is entitled in respect of an animation is determined by the amount of core expenditure (see APC50010) which is used or consumed in the UK.

Where a TPC incurs expenditure on equipment which is used in principal photography in the UK, this equipment will generally be treated as goods that are used or consumed in the UK. This will also apply to items that are purchased as ‘props’ for the purposes of the animation.

This applies to computer-generated or hand-drawn animation as much as it does to stop-frame animation. Where artwork is commissioned or purchased for use as a backdrop or another static image, that expenditure will be akin to equipment used or consumed where principal photography takes place.

However, if there is an element of animation in the image, it is more akin to a performance and should be treated as principal photography in itself. Each situation will need to be judged on its individual facts.