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HMRC internal manual

Animation Production Company Manual

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HM Revenue & Customs
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Avoidance and disclosure: avoidance - inflation of claims

S1216CL Corporation Tax Act 2009

The television tax regime includes a general anti-avoidance provision designed to prevent a Television Production Company (TPC) inflating the amount of Television Tax Relief (TTR) to which it is entitled.

Its effect is to exclude any transaction undertaken with the aim of inflating the relief.

Where a transaction is attributable to arrangements entered into wholly or mainly with a purpose of gaining TTR that would not otherwise be available, or of increasing the amount of additional deduction or payable credit beyond what was otherwise available, then the transaction can be disregarded in determining the amount of any additional deduction or payable credit.

Example

A TPC hires an actor for £100k, but draws up a contract in which the total fee payable is set at £150k. The actor agrees to reinvest £50k in the animation in the form of a non-recourse loan to the TPC.

The TPC has no obligation to repay the loan from the actor and therefore this aspect of the contract has no commercial basis. Instead, the whole purpose of that part of the transaction was to gain an amount of TTR which would not otherwise be available. Therefore, £50k of the contracted fee should be disregarded when calculating the amount of TTR to which the TPC is entitled.

This provision is deliberately drawn widely, and whether it is used will depend on the intention of the TPC in entering into the transaction rather than the type of transaction itself. It is not, however, designed to affect normal commercial arrangements entered into by TPCs to obtain TTR within the intent of the legislation.

You should consult Anti-Avoidance Group in cases where you consider that the use of this provision might be warranted or where you suspect that you have identified artificial arrangements which have been entered into with the whole or main purpose of increasing the amount of TTR available.