CREC026000 - Qualifying productions: switching between theatrical release and broadcast intention
Section 1179E Corporation Tax Act (CTA) 2009听
The theatrical release condition and the broadcast condition are tested for each accounting period, based on the intention for the production at the end of that period.听If they are not met for an accounting period, an Audio-Visual Expenditure Credit (AVEC) cannot be claimed for that period or any subsequent听period.听
However, AVEC gives flexibility where the intention changes partway through production.听If a production does not meet the theatrical release condition for an accounting period because the intention has changed to broadcast, or vice versa, the production鈥檚 eligibility for relief is uninterrupted.听
Assuming all other criteria for the new type of production are met, a听film or TV programme听will only fall out of eligibility for relief if, at the end of an accounting period,听
there is no intention for theatrical release, and听
there is also no intention for broadcast
Note that there is no restriction on the type of production that is switching. Any type of TV programme听can meet the theatrical release condition instead of the broadcast condition: high-end TV, animated programmes and children鈥檚 programmes.听
Example听
A film studio begins work on a feature-length animated production which it intends to release as a film in cinemas. It expects to make most of the money from the film from this release. At the end of the first accounting period, the plan is unchanged,听and the theatrical release condition is therefore met.听
During the second accounting period, a streaming company acquires听the studio and all its productions. The streaming company decides听to release the film on its streaming platform, with no cinema showings. By the end of the second accounting period, there is no longer any intention to release the film in cinemas, so the theatrical release condition is no longer met. However, the film is still eligible for AVEC听because the broadcast condition is met instead听and it meets the other qualifying criteria for animated TV programmes (for which see CREC022000 and CREC024000).
Effect on treatment of production听
Productions which switch from theatrical release intention to broadcast intention and vice versa are treated as if they have swapped production type entirely, except for the BFI certificate required听(for which see below).听
A TV programme听which later meets the theatrical condition听instead听is treated as a film for any accounting period in which it relies on the theatrical release condition to qualify. This means it only needs to meet the qualifying criteria for films听and not the criteria for TV programmes.听
Likewise, a film which later meets the broadcast condition instead is treated as a TV programme听for any accounting period in which it relies on the broadcast condition to qualify. This means it needs to meet the qualifying criteria for TV programmes and not the criteria for films.听
Companies must complete an additional information form before submitting听a claim for AVEC and VGEC听(CREC081000). The听form asks the company to identify听the type(s) of production it is claiming for. If a production has switched, the company should fill out the form using the new type of production. It is helpful to use the extra information text box in the 'Additional information' section of the form to tell HMRC about the change of circumstances.
BFI certificates听
A production which switches from film to TV or vice versa can continue to rely on any BFI certificate that has already been issued in respect of it. The production company does not need to revoke the original certificate or apply for a new one. However, when it comes to final certification, the company should apply for the cultural test that applies to the current type of the production.听
For example, if the production company for the film in our earlier example had already obtained an interim听film certificate for the production,听it could claim AVEC on the production as a TV programme听using that certificate. Once production is complete, the company should apply for a final certificate听under the cultural test for TV programmes.
Switching between different types听of production 鈥� effect on rate of credit听
Switching from film to TV programme听and vice versa may affect听the percentage of qualifying expenditure the production receives as a credit, depending on whether the production was originally in a higher rate category. Please see CREC061300 for details.
If both conditions are met听
Where a production is capable of satisfying both the theatrical release and broadcast conditions听at the end of an accounting period, the theatrical release condition takes precedence听and the production is treated as a film. This means it only needs to meet the qualifying criteria for films听and not the听criteria for TV programmes.听This would be the case if, for example, a production was expected to have a full theatrical run followed by a release on a streaming site.听