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This example shows how Part 15A Corporation Tax Act 2009 operates to arrive at the profits/losses of a Television Production Company (TPC) that is commissioned to produce a television programme in which it goes on to retain overseas exploitation rights.

A TPC is commissioned by a broadcaster to make a programme for transmission on a UK terrestrial network. »Ê¹ÚÌåÓýapp total cost of recording, editing and production is estimated at the outset as being £700,000. »Ê¹ÚÌåÓýapp broadcaster contracts to pay £1.5m for the right to broadcast the programme once it is completed. »Ê¹ÚÌåÓýapp programme is not eligible for Television Tax Relief.

»Ê¹ÚÌåÓýapp TPC will retain the residual rights to exploit the programme in other territories. It has extensive experience of selling programmes overseas and broadcasters in a number of countries express an interest. »Ê¹ÚÌåÓýapp company anticipates sales of at least a further £1m based on its past experience of selling similar material and it anticipates further legal costs of £100,000 in securing these contracts. »Ê¹ÚÌåÓýapp total estimated expenditure for the programme is therefore £800,000.

At the end of the first accounting period the company has spent £900,000 on recording, editing and production and has completed the programme. It has spent £50,000 in negotiating further contracts but as yet it has not secured a contract.

When computing its profits for Corporation Tax purposes the TPC must estimate total income from the programme and total costs. At the end of the accounting period it has one contract to sell the UK rights for £1.5m that it has fulfilled at a cost of £900,000. Other broadcasters have expressed interest, but this does not give the TPC a realistic and quantifiable expectation of income. »Ê¹ÚÌåÓýapp estimated total income at the end of the first accounting period is therefore £1.5m.

»Ê¹ÚÌåÓýapp estimated total costs at the outset were £800,000 but the programme actually cost £900,000 to make and the company still considers that it is going to pay £100,000 in legal costs to secure the overseas contracts. »Ê¹ÚÌåÓýapp total estimated costs are therefore £1m. Of this estimated amount £950,000 is represented in work done.

»Ê¹ÚÌåÓýapp proportion of the estimated total income treated as earned at the end of the accounting period is therefore:

-	Amount	Notes
Expenditure incurred by end of period	£950,000	Out of total expected costs of £1m
Income treated as earned by end of period	£1,425,000	Expected total income of £1.5m. »Ê¹ÚÌåÓýapp extent to which this is allocated to the mirrors the extent to which total expected costs fall within that period. (£1.425m = £1.5m x £0.95m/£1m)
Profit	£475,000	-