D7.1205 Film production companies—calculation of profits and losses
The production activities of a film production company in relation to a film beginning principal photography on or after 1 January 2007 are treated as a separate trade of that company. The activities are separate from any other activities of the company, including any activities relating to another film1. Profits and losses are therefore calculated separately for each film that the company produces.
Further guidance on the taxation of film production companies can be found in HMRC's Film Production Company Manual at FPC20000.
The trade begins on the earlier of the beginning of pre-production of the film and the receipt of any income from the film by the film production company2.
Development costs incurred by the company before it begins trading as a film production company are treated as expenditure of the trade incurred immediately after the company began to carry on that trade3. However, if the expenditure has already been relieved under another provision, the company must amend its tax return accordingly4. For this purpose, the normal time limits for amending a return are disapplied5.
The rules apply a revenue treatment to income from, and expenditure on, a film. This is the case even where the costs would normally be capitalised on the balance sheet. However,