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HMRC internal manual

Television Production Company Manual

HM Revenue & Customs
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Eligible expenditure: distinguishing ‘development’ from later stages of production

Television Tax Relief (TTR) for television programmes is available on production expenditure incurred at all stages except for development. It is therefore important to identify and quantify development expenditure.

The production process for television programmes may vary significantly between different productions and particularly where different television programme techniques are involved. However, in most cases it should be straightforward to distinguish between activities that constitute principal photography (or rendering) or post-production.

The critical distinction is usually between development expenditure and pre-production expenditure.

Development expenditure is essentially speculative. It relates to those activities undertaken with the aim of determining whether the film is a commercially feasible project which might proceed to the later stages of production.

Pre-production expenditure, in contrast, is not speculative. It is incurred on those activities undertaken in the knowledge that a decision has been taken for the film to go ahead. Such activities can, however, be undertaken even where some development activities are still taking place.

Pre-production expenditure can be incurred whilst development activities are still ongoing.

Expenditure incurred in the knowledge that the project may possibly not proceed is not necessarily development expenditure.

For example, development of the script can be an essential part of a television programme project being green-lighted. However, this is also a necessary part of pre-production.

Expenditure attributable partly to development and partly to later stages of production

Some costs relate both to the developments stage of a television programme and to other stages of production. Examples of such costs would be those incurred on the script and the producer’s fee. 

In each case it is necessary to establish to what extent the expenditure on the script is incurred on establishing whether a programme can be made and how far it is incurred on actually making the programme.

The correct apportionment will vary according to circumstances. There is no definitive apportionment method and any reasonable method may be used. A Television Production Company (TPC) may rely on an estimate used in the production of previous television programmes, but this will only be appropriate where the facts are similar.

If a producer worked substantially full time on a television programme for a year, with the first three months being taken up with development and the remaining nine months with pre-production, principal photography and post-production, it would be reasonable to allocate one quarter of the producer’s fees, for that period, to development. That is, 75% of his annual fee would be treated as core expenditure.

A script could likewise be used during the development stage of a television programme as well as the later stages of production. If the original script was more or less unchanged through this process then it may be reasonable to allocate its costs according to how it is used through the various stages of production. This could be evidenced by the extent to which reference is made to it throughout these stages.

It may be the case that the script writer is paid for an initial fee for a first draft of the script for development purposes followed by further instalments as filming proceeds and refinements are made. It may be reasonable to allocate costs according to the timing of payments and the use to which the various versions are put.

For example, if a single rough draft of the script is required for the development stage, the initial fee related to this would be development expenditure and not be included in core expenditure. Provided that all subsequent payments for script writing follow the decision to proceed with the television programme, then these may be treated as core expenditure.