Film production company tax credits

By Tolley
Corporation_tax_img10

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Film production company tax credits
  • Introduction
  • Qualifying companies
  • Conditions for the film tax relief
  • Intended theatrical release
  • British film
  • UK expenditure condition (CTA 2009, s 1198)
  • Additional deduction
  • Surrenderable Loss
  • Surrendering the loss for the film tax credit
  • Paying the film tax credit
  • Losses
  • Claim
  • Interim claims
  • Abandoned films
  • Anti-avoidance

Introduction

Finance Act 1996 introduced a special regime for film production companies, now included in CTA 2009, ss 1188–1216. In addition, the legislation provides for qualifying films to receive an additional tax deduction in respect on the production company's expenditure on production of a film. This enhancement is up to 80% of qualifying expenditure on the film production.

This additional deduction can be set off against future taxable profits or, if the company wants to, be surrendered in exchange for a payment to the company by HMRC. This payment is worth up to 20% of the film production costs. As indicated below, it will nearly always be beneficial to make the election and surrender the loss and receive the payment.

The purpose of the tax credit was to encourage the making of films by UK companies and to replace the previous discredited regime of relief under Finance Act (No 2) 1992, s 42 and Finance Act (No 2) 1997, s 48. These reliefs had sometimes resulted in tax relief for investors in artificial tax schemes.

Such has been the success of the new regime introduced by Finance Act 1996 that the legislation has been largely replicated in the new separate tax regimes for companies producing television, animation and most recently, children’s television programmes. See the Television tax reliefs ― key provisions guidance note for further details.

All references to the HMRC Film Production Company manual (FPC) in this guidance note are subscription sensitive.

Qualifying companies

The tax legislation dealing with the additional deduction for corporation tax purposes follows on from the rules governing the taxation of film production companies. See the Taxation of Film Production Companies guidance note for details on the meaning of a FPC producing a qualifying film. The legislation is at CTA 2009, ss 1181–1182.

Note that the additional deduction

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