Taxation: separate trade - commencement
S1216B Corporation Tax Act 2009 (CTA 2009)
Where a company is a Television Production Company (TPC) (TPC10110) for the purposes of Part 15A CTA 2009, the production of each television programme (TPC10100) is treated as a separate trade. This isolates the development of each programme on an individual basis for the purpose of calculating profits and losses.
The point at which this trade starts is determined by special rules but, once set up, the normal rules apply for when a trade ceases.
The normal rules for deciding when a trade commences do not apply when deciding when a separate programme trade commences. Special rules apply instead.
The TPC is treated as commencing a new trade on the earliest of:
- commencement of pre-production, or
- receipt of income for the programme.
Commencement triggered by pre-production expenditure
In many cases, the trade will commence when the programme begins pre-production (TPC10130).
This means that as soon as the TPC begins to incur pre-production expenditure on the television programme, a separate programme trade relating only to that programme begins. Income and expenditure relating to the programme is then accounted for in relation to that trade using the TTR rules.
See TPC20120 for how development costs can be brought into the programme trade.
The different stages of television programme production (TPC10130) are not necessarily sequential and may well overlap or be out of order.
For example, some post-production work will precede principal photography. In addition, significant amounts of work at the pre-production stage may have occurred before the development stage has finished.
With television programmes it is normal for expenditure on pre-production activities to trigger the commencement of the programme trade while development expenditure is still being incurred.
Commencement triggered by receipt of income
In some cases, the trade will commence before pre-production starts if the TPC receives income relating to the television programme (see TPC20210). For example, the commencement of the trade may be triggered when a TPC receives a grant to help fund development activity.
This ensures that all television programme income is taxable as trading income. This income will be offset by pre-trading expenditure brought into account on the commencement of the trade. However, it may produce taxable profits if insufficient expenditure has been incurred at by the end of the accounting period.
The fact that the TPC has commenced trade does not mean that pre-production has commenced.