UK Film Tax Relief
For films of all budget levels, the Film Production Company (FPC) can claim a payable cash rebate of up to 25% of UK qualifying film production expenditure.
For films with a core expenditure of more than £ 20,000, which completed principal photography before 1 April 2015, the FPC can claim a payable cash rebate of up to 25% on the first £ 20,000 of qualifying UK expenditure, with the remaining qualifying UK expenditure receiving a 20% tax rebate.
Film Production Company (FPC)
UK Film Tax Relief is available to FPCs.
The FPC must be within the UK corporation tax net and it is defined as the company responsible for the principal photography and post production of the film and for the completion of the finished film.
There is no requirement for the film rights to be owned by the FPC at the time the film is completed.
Accessing UK Film Tax Relief
Tax relief is available for British qualifying films and there is no cap on the amount which can be claimed.
- either pass the Cultural Test or qualify as an official co-production;
- be intended for theatrical release;
- reach a minimum UK spend requirement of 10%, including those made under official co-production treaties.
Tax relief is available on qualifying UK production expenditure on the lower of either:
- 80% of total core expenditure, or
- the actual UK core expenditure incurred.
Minimum UK spend requirement
A minimum of 10% of costs must be spent on UK qualifying production expenditure.
UK qualifying production expenditure is defined as expenditure incurred on filming activities (pre-production, principal photography and post production) which take place within the UK, irrespective of the nationality of the persons carrying out the activity.
HM Revenue & Customs’ (HMRC) definition of UK spend introduces the concept of where a good or service is “used or consumed” in the UK. If they are used or consumed in the UK, the expenditure is treated as UK expenditure (under the rules set out in the clauses of the Finance Bill). If they are used or consumed outside the UK, they do not count as UK expenditure.
Example: Limited-budget film
An independent FPC makes a film with total core expenditure of £10.000, all of which is UK expenditure. The film was commissioned by an unrelated distributor which pays £9,000 for it.
Pre-FTR profit (loss) (£1,000)
Enhanceable expenditure £8,000
(UK core expenditure of £10,000 x 80%)
Additional deduction (£8,000)
(Rate of enhancement applied to enhanceable expenditure = 100%)
Post-FTR profit (loss) (£9,000)
The surrenderable loss is the lesser of
- the trading loss: £9,000 and
- the enhanceable expenditure on which the additional deduction for period: £8,000.
In this case, the film production company can surrender up to £8,000.
The amount of credit due is:
- the payable credit rate (for a limited-budget film): 25%
- multiplied by the loss surrendered: £8,000,
- giving a payment £2,000 (£8,000 x 25% = £2,000, assuming that the maximum amount of loss is surrendered). This is equal to 20% of the total core expenditure (£10,000 x 20% = £2,000).
Author: EMILIO MENEGHELLA