(b) in Northern Ireland,

the reference in subsection (3)(b) to 12 months is to be read as a
reference to 6 months.

CHAPTER 4 Programme losses

1216D 5 Application of sections 1216DA and 1216DB

(1) Sections 1216DA and 1216DB apply to a company that is the
television production company in relation to a relevant programme.

(2) In those sections—

• “the completion period” means the accounting period of the
  10company—

  (a)

  in which the relevant programme is completed, or

  (b)

  if the company does not complete the relevant
  programme, in which it abandons television
  production activities in relation to the programme,

• 15“loss relief” includes any means by which a loss might be used
  to reduce the amount in respect of which the company, or any
  other person, is chargeable to tax,

• “pre-completion period” means an accounting period of the
  company before the completion period, and

• 20“the separate programme trade” means the company’s separate
  trade in relation to the relevant programme (see section
  1216B).

1216DA Restriction on use of losses while programme in production

(1) This section applies if in a pre-completion period a loss is made in the
25separate programme trade.

(2) The loss is not available for loss relief except to the extent that it may
be carried forward under section 45 of CTA 2010 to be set against
profits of the separate programme trade in a subsequent period.

1216DB Use of losses in later periods

(1) 30This section applies to the following accounting periods of the
company (“relevant later periods”)—

(a) the completion period, and

(b) any subsequent accounting period during which the separate
programme trade continues.

(2) 35Subsection (3) applies if a loss made in the separate programme trade
is carried forward under section 45 of CTA 2010 from a pre-
completion period to a relevant later period.

(3) So much (if any) of the loss as is not attributable to television tax
relief (see subsection (6)) may be treated for the purposes of loss
40relief as if it were a loss made in the period to which it is carried
forward.

(4) Subsection (5) applies if in a relevant later period a loss is made in the
separate programme trade.

(5) The amount of the loss that may be—

(a) deducted from total profits of the same or an earlier period
5under section 37 of CTA 2010, or

(b) surrendered as group relief under Part 5 of that Act,

is restricted to the amount (if any) that is not attributable to television
tax relief (see subsection (6)).

(6) The amount of a loss in any period that is attributable to television
10tax relief is calculated by deducting from the total amount of the loss
the amount there would have been if there had been no additional
deduction under Chapter 3 in that or any earlier period.

(7) This section does not apply to a loss to the extent that it is carried
forward or surrendered under section 1216DC.

1216DC 15 Terminal losses

(1) This section applies if—

(a) a company (“company A”) is the television production
company in relation to a qualifying programme,

(b) company A ceases to carry on its separate trade in relation to
20that programme (“trade X”) (see section 1216B), and

(c) if company A had not ceased to carry on trade X, it could
have carried forward an amount under section 45 of CTA
2010 to be set against profits of trade X in a later period (“the
terminal loss”).

(2) 25If on cessation of trade X company A—

(a) is the television production company in relation to another
qualifying programme, and

(b) is carrying on its separate trade in relation to that programme
(“trade Y”),

30it may (on making a claim) make an election under subsection (3).

(3) The election is to have the terminal loss (or a part of it) treated as if it
were a loss brought forward under section 45 of CTA 2010 to be set
against the profits of trade Y in the first accounting period beginning
after the cessation and so on.

(4) 35Subsection (5) applies if on cessation of trade X—

(a) there is another company (“company B”) that is the television
production company in relation to a qualifying programme,

(b) company B is carrying on its separate trade in relation to that
programme (“trade Z”), and

(c) 40company B is in the same group as company A for the
purposes of Part 5 of CTA 2010 (group relief).

(5) Company A may surrender the terminal loss (or a part of it) to
company B.

(6) On the making of a claim by company B the amount surrendered is
45treated as if it were a loss brought forward by company B under
section 45 of CTA 2010 to be set against the profits of trade Z of the

first accounting period of that company beginning after the cessation
and so on.

(7) The Treasury may, in relation to the surrender of a loss under
subsection (5) and the resulting claim under subsection (6), make
5provision by regulations corresponding, subject to such adaptations
or other modifications as appear to them to be appropriate, to that
made by Part 8 of Schedule 18 to FA 1998 (company tax returns:
claims for group relief).

(8) “Qualifying programme” means a relevant programme in relation to
10which the conditions for television tax relief are met (see 1216C(2)).

CHAPTER 5 Provisional entitlement to relief

1216E Introduction

(1) In this Chapter—

• “the company” means the television production company in
  15relation to a relevant programme,

• “the completion period” means the accounting period of the
  company—

  (a)

  in which the relevant programme is completed, or

  (b)

  if the company does not complete the relevant
  20programme, in which it abandons television
  production activities in relation to it,

• “interim accounting period” means any earlier accounting
  period of the company during which television production
  activities are carried on in relation to the relevant
  25programme,

• “interim certificate” and “final certificate” have the meaning
  given by section 1216CC,

• “the separate programme trade” means the company’s separate
  trade in relation to the relevant programme (see section
  301216B), and

• “special television relief” means—

  (a)

  television tax relief, or

  (b)

  relief under section 1216DC (transfer of terminal
  losses from one relevant programme to another).

(2) 35The company’s company tax return for the completion period must
state that the relevant programme has been completed or that the
company has abandoned television production activities in relation
to it (as the case may be).

1216EA Certification as a British programme

(1) 40The company is not entitled to special television relief for an interim
accounting period unless its company tax return for the period is
accompanied by an interim certificate.

(2) If an interim certificate ceases to be in force (otherwise than on being
superseded by a final certificate) or is revoked, the company—

(a) is not entitled to special television relief for any period for
which its entitlement depended on the certificate, and

(b) must amend accordingly its company tax return for any such
period.

(3) 5If the relevant programme is completed by the company—

(a) its company tax return for the completion period must be
accompanied by a final certificate,

(b) if that requirement is met, the final certificate has effect for
the completion period and for any interim accounting period,
10and

(c) if that requirement is not met, the company—

(i) is not entitled to special television relief for any
period, and

(ii) must amend accordingly its company tax return for
15any period for which such relief was claimed.

(4) If the company abandons television production activities in relation
to the relevant programme—

(a) its company tax return for the completion period may be
accompanied by an interim certificate, and

(b) 20the abandonment of television production activities does not
affect any entitlement to special television relief in that or any
previous accounting period.

(5) If a final certificate is revoked, the company—

(a) is not entitled to special television relief for any period, and

(b) 25must amend accordingly its company tax return for any
period for which such relief was claimed.

1216EB The UK expenditure condition

(1) The company is not entitled to special television relief for an interim
accounting period unless—

(a) 30its company tax return for the period states the amount of
planned core expenditure on the relevant programme that is
UK expenditure, and

(b) that amount is such as to indicate that the condition in section
1216CE (the UK expenditure condition) will be met on
35completion of the programme.

If those requirements are met, the company is provisionally treated
in relation to that period as if that condition was met.

(2) If such a statement is made but it subsequently appears that the
condition will not be met on completion of the programme, the
40company—

(a) is not entitled to special television relief for any period for
which its entitlement depended on such a statement, and

(b) must amend accordingly its company tax return for any such
period.

(3) 45When the relevant programme is completed or the company
abandons television production activities in relation to it (as the case
may be), the company’s company tax return for the completion

period must be accompanied by a final statement of the amount of
core expenditure on the programme that is UK expenditure.

(4) If that statement shows that the condition in section 1216CE is not
met, the company—

(a) 5is not entitled to special television relief for any period, and

(b) must amend accordingly its company tax return for any
period for which such relief was claimed.

1216EC Time limit for amendments and assessments

Any amendment or assessment necessary to give effect to the
10provisions of this Chapter may be made despite any limitation on the
time within which an amendment or assessment may normally be
made.”

Part 2 Commencement

2 (1) 15Any power conferred on the Secretary of State or the Treasury by virtue of
this Schedule to make regulations or an order comes into force on the day on
which this Act is passed.

(2) So far as not already brought into force by sub-paragraph (1), the
amendments made by this Schedule come into force in accordance with
20provision contained in an order made by the Treasury.

(3) An order under sub-paragraph (2)—

(a) may make different provision for different purposes;

(b) may make such adaptations of Part 15A of CTA 2009 as appear to be
necessary or expedient in consequence of other provisions of this Act
25not yet having come into force.

3 (1) The amendments made by this Schedule have effect in relation to accounting
periods beginning on or after 1 April 2013.

(2) Sub-paragraph (3) applies where a company has an accounting period
beginning before 1 April 2013 and ending on or after that date (“the
30straddling period”).

(3) For the purposes of Part 15A of CTA 2009—

(a) so much of the straddling period as falls before 1 April 2013, and so
much of that period as falls on or after that date, are treated as
separate accounting periods, and

(b) 35any amounts brought into account for the purposes of calculating for
corporation tax purposes the profits of any trade of the company for
the straddling period are apportioned to the two separate accounting
periods on such basis as is just and reasonable.

Section 35

SCHEDULE 16 Tax relief for video games development

Part 1 Amendments of CTA 2009

1 5After Part 15A of CTA 2009 (inserted by Schedule 15 above) insert—

“CHAPTER 1 Introduction

Introductory

1217A Overview of Part

(1) This Part is about video games development.

(2) 10Sections 1217AA to 1217AF contain definitions and other provisions
about interpretation that apply for the purposes of this Part.

See, in particular—

(a) section 1217AA, which contains provision about the meaning
of “video game”, and

(b) 15section 1217AB, which explains how a company comes to be
treated as the video games development company in relation
to a video game.

(3) Chapter 2 is about the taxation of the activities of a video games
development company and includes—

(a) 20provision for the company’s activities in relation to its video
game to be treated as a separate trade, and

(b) provision about the calculation of the profits and losses of
that trade.

(4) Chapter 3 is about relief (called “video games tax relief”) which can
25be given to a video games development company—

(a) by way of additional deductions to be made in calculating the
profits or losses of the company’s separate trade, or

(b) by way of a payment (a “video game tax credit”) to be made
on the company’s surrender of losses from that trade.

(5) 30Chapter 4 is about the relief which can be given for losses made by a
video games development company in its separate trade, including
provision for certain such losses to be transferred to other separate
trades.

(6) Chapter 5 provides—

(a) 35for relief under Chapters 3 and 4 to be given on a provisional
basis, and

(b) for such relief to be withdrawn if it turns out that conditions
that must be met for such relief to be given are not actually
met.

Interpretation

1217AA 5 “Video game” etc

(1) This section applies for the purposes of this Part.

(2) “Video game” does not include—

(a) anything produced for advertising or promotional purposes,
or

(b) 10anything produced for the purposes of gambling (within the
meaning of the Gambling Act 2005).

(3) References to a video game include the game’s soundtrack.

(4) A video game is completed when it is first in a form in which it can
reasonably be regarded as ready for copies of it to be made and made
15available to the general public.

1217AB Video games development company

(1) For the purposes of this Part “video games development company”
is to be read in accordance with this section.

(2) There cannot be more than one video games development company
20in relation to a video game.

(3) A company is the video games development company in relation to
a video game if the company (otherwise than in partnership)—

(a) is responsible for designing, producing and testing the video
game,

(b) 25is actively engaged in planning and decision-making during
the design, production and testing of the video game, and

(c) directly negotiates, contracts and pays for rights, goods and
services in relation to the video game.

(4) If there is more than one company meeting the description in
30subsection (3), the company that is most directly engaged in the
activities referred to in that subsection is the video games
development company in relation to the video game.

(5) If there is no company meeting the description in subsection (3),
there is no video games development company in relation to the
35video game.

(6) A company may elect to be regarded as a company which does not
meet the description in subsection (3).

(7) The election—

(a) must be made by the company by being included in its
40company tax return for an accounting period (and may be
included in the return originally made or by amendment),
and

(b) may be withdrawn by the company only by amending its
company tax return for that accounting period.

(8) The election has effect in relation to video games which begin to be
produced in that or any subsequent accounting period.

1217AC “Video game development activities” etc

(1) In this Part “video game development activities”, in relation to a
5video game, means the activities involved in designing, producing
and testing the video game.

(2) The Treasury may by regulations—

(a) amend subsection (1),

(b) provide that specified activities are or are not to be regarded
10as video game development activities or as video game
development activities of a particular description, and

(c) provide that, in relation to a specified description of video
game, references to video game development activities of a
particular description are to be read as references to such
15activities as may be specified.

“Specified” means specified in the regulations.

1217AD “Core expenditure”

(1) In this Part “core expenditure”, in relation to a video game, means
expenditure on designing, producing and testing the video game.

(2) 20But the following descriptions of expenditure are not to be regarded
as core expenditure for the purposes of this Part—

(a) any expenditure incurred in designing the initial concept for
a video game;

(b) any expenditure incurred in debugging a completed video
25game or carrying out any maintenance in connection with
such a video game.

1217AE “UK expenditure” etc

(1) In this Part “UK expenditure”, in relation to a video game, means
expenditure on goods or services that are used or consumed in the
30United Kingdom.

(2) Any apportionment of expenditure as between UK expenditure and
non-UK expenditure for the purposes of this Part is to be made on a
just and reasonable basis.

(3) The Treasury may by regulations amend subsection (1).

1217AF 35 “Company tax return”

In this Part “company tax return” has the same meaning as in
Schedule 18 to FA 1998 (see paragraph 3(1)).

CHAPTER 2 Taxation of activities of video games development company

Separate video game trade

1217B Activities of video games development company treated as a separate
trade

(1) 5This Chapter applies for corporation tax purposes to a company that
is the video games development company in relation to a video
game.

(2) The company’s activities in relation to the video game are treated as
a trade separate from any other activities of the company (including
10any activities in relation to any other video game).

(3) In this Chapter the separate trade is called “the separate video game
trade”.

(4) The company is treated as beginning to carry on the separate video
game trade—

(a) 15when the design of the video game begins, or

(b) if earlier, when any income from the video game is received
by the company.

1217BA Calculation of profits or losses of separate video game trade

(1) This section applies for the purpose of calculating the profits or
20losses of the separate video game trade.

(2) For the first period of account the following are brought into
account—

(a) as a debit, the costs of the video game incurred (and
represented in work done) to date, and

(b) 25as a credit, the proportion of the estimated total income from
the video game treated as earned at the end of that period.

(3) For subsequent periods of account the following are brought into
account—

(a) as a debit, the difference between the amount of the costs of
30the video game incurred (and represented in work done) to
date and the corresponding amount for the previous period,
and

(b) as a credit, the difference between the proportion of the
estimated total income from the video game treated as earned
35at the end of that period and the corresponding amount for
the previous period.

(4) The proportion of the estimated total income treated as earned at the
end of a period of account is given by—

Supplementary

1217BB Income from the video game

(1) 5References in this Chapter to income from the video game are to any
receipts by the company in connection with the production or
exploitation of the video game.

(2) This includes—

(a) receipts from the sale of the video game or rights in it,

(b) 10royalties or other payments for use of the video game or
aspects of it (for example, characters or music),

(c) payments for rights to produce games or other merchandise,
and

(d) receipts by the company by way of a profit share agreement.

(3) 15Receipts that (apart from this subsection) would be regarded as of a
capital nature are treated as being of a revenue nature.

1217BC Costs of the video game

(1) References in this Chapter to the costs of the video game are to
expenditure incurred by the company on—

(a) 20video game development activities in connection with the
video game, or

(b) activities with a view to exploiting the video game.

(2) This is subject to any provision of the Corporation Tax Acts
prohibiting the making of a deduction, or restricting the extent to
25which a deduction is allowed, in calculating the profits of a trade.

(3) Expenditure that (apart from this subsection) would be regarded as
of a capital nature by reason only of being incurred on the creation of
an asset (the video game) is treated as being of a revenue nature.

1217BD When costs are taken to be incurred

(1) 30For the purposes of this Chapter costs are incurred when they are
represented in the state of completion of the work in progress.

(2) Accordingly—

(a) payments in advance for work to be done are ignored until
the work has been carried out, and

(b) 35deferred payments are recognised to the extent that the work
is represented in the state of completion.

(3) The costs incurred on the video game are taken to include an amount
that has not been paid only if it is the subject of an unconditional
obligation to pay.

(4) 40If an obligation is linked to income being earned from the video
game, no amount is to be brought into account in respect of the costs
of the obligation unless an appropriate amount of income is or has
been brought into account.