I have a client who is a visual effects artist in the tv and movie industry. As part of prospecting for future work and to develop his career it is necessary that he prepares short virals/films highlighting his skills which he sends to major film studios/Art Houses. The costs of doing so can be rather expensive as he has to hire other freelancers with additional skills to assist with this and the short films will never create income on their own. We would like to claim these costs against his freelance income as it is helping to prospect for future work. My only concern would be to HMRC trying to object to this on the basis that the expense is not directly related to the contract generating the freelance income. I was wondering what peoples thoughts on this would be.
Thanks
Replies (5)
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Revenue or capital?
Tricky one to call, but the films could be viewed as either:
advertising or,an enduring asset -whether or not these are Intelectual Property is only important if he wants to claim WDA. In any event they are likely to have no value to anyone else other than your client so I would take the view that 100% of the cost could be w/o and a tax deduction claimed in year 1 or 2.
The way I read your post it sounds like the client creates a different film depening on who the potential customer is. Presumably therefore they will be updated regularly and parts, if not all, of the old films become morribund. If that is true and the original versions fall out of use within a couple of years I would say that teh cost of producing them constitutes a revenue cost and should be claimed as an expense. Otherwise WDAs should be claimed.
Tony
Enduring benefit
If the costs establish an enduring benefit then, as pointed out by Clouseau, they are capital in ntaure. However I think I would claim capital allowances on them.
In that case
I would write them off to P&L as an expense entitled "advertising and promotion".