Corporation Tax Act 2009 section 1179BB

Calculation of profits

Section 1179BB sets out how to calculate the profits of the separate production trade for films, television programmes, and video games, using a cost-based completion method to recognise income progressively as production costs are incurred.

• Profits are calculated by matching costs incurred to date against a proportionate share of estimated total income, using the formula (C / T) × I, where C is costs to date, T is estimated total cost, and I is estimated total income
• In the first period, the full costs to date are the debit and the proportionate income is the credit; in subsequent periods, only the incremental movement in each figure since the previous period is brought into account
• Costs may only be included if they would generally be deductible in computing trading profits for corporation tax purposes, and all estimates must be made as at the balance sheet date on a just and reasonable basis
• Where a period of account of the separate production trade does not align with the company's accounting period, the resulting profit or loss is apportioned between accounting periods on a time basis (by number of days)