Eligible expenditure: UK expenditure: post-production services
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 a television programme trade is determined by the amount of core expenditure (see TPC50010) which is used or consumed in the UK.
Post-production is the stage of television production where the output of previous stages of development, pre-production and principal photography is assembled.
The services related to post-production may take place at a different location from that where the principal photography took place. This is not necessarily the case but it cannot be assumed that because a programme was predominantly produced in one location, all post-production expenditure also occurred there.
Most post-production will occur after principal photography. However, this is not necessarily the case and it might be that some aspects of post-production occur before some aspects of principal photography. This might occur due to elements of principal photography taking place later than others, as with computer-generated imagery and other special effects. Alternatively, the completed soundtrack might be required for principal photography
For example, a sound engineer will tidy up the soundtrack, adding sound effects and mixing it to the edited footage. Whilst this can only be completed at the end of the production of a programme or a scene, individual episodes and sequences can be done whilst other activities are progressing.
However, in terms of process, this clearly follows principal photography. There needs to be an awareness of what activities constitute post-production and where these might take place. If the TPC subcontracts these, they will need to establish from their suppliers the extent to which these services are used or consumed outside the UK.
Computer-generated imagery (CGI)
The same argument holds where CGI services are used. Under Film Tax Relief (FTR), CGI has routinely been treated as the creation of new images, akin to the creation of new images of actors during principal photography (FPC50090).
Where CGI services are used in post-production, it is more likely that they will be used or consumed where the service is delivered. This is because they will be provided on top of the programme completed so far.
Consequently, CGI that is performed in the UK will often be treated as UK expenditure, whereas CGI performed overseas will often not be allowed as UK expenditure.
CGI is often sub-contracted where special effects are incidental to the production. This means that the TPC will need to enquire where the work is being performed by the subcontractor.
Whilst some sound editing might occur at an early stage to help guide the production process, there may still be post-production services requiring greater consideration as to where it is used or consumed.
A TPC engages a UK CGI company to create images and add special effects for a programme. This is done to the master recording, and the CGI company is given a certain amount of creative freedom as to the final effects.
The CGI company has two branches, one in the UK and one overseas. The work is split evenly between the two locations. Half the expenditure is treated as UK expenditure.
The half of the expenditure attributable to the overseas branch is not treated as UK expenditure because the service is used or consumed outside the UK.
A TPC commissions a composer resident in New York to write music for a programme which is being produced in the UK. The music is recorded by an orchestra in London and then incorporated into the programme during post-production in the United States.
Whilst it might be fair and reasonable to apportion the cost of the score between UK expenditure and non-UK expenditure, it is also fair to conclude that the score has largely been used or consumed during the recording in the UK.
The expenditure on recording the music is analogous to that on principal photography with the score playing the role of the script. It is therefore used or consumed in the UK.
The expenditure on incorporating the music is not UK expenditure, but the work will largely be based on the recording itself and not the score. Therefore the score will mostly be used or consumed in the UK.