As an accountant to film professionals, questions surrounding film production credit come up continuously. The Finance Act of 2006 (FA06) reformed tax on the film industry completely and led to the introduction of a new film tax relief (FTR).

Under FA06 each film is regarded as a separate trade and specifies when that trade begins. The act also restricts so how far losses from the trade can be utilised during and after the production of a film (FPC30000).

Films that have no film production company do not meet the regulations of the 2006 Finance Act and so will be subject to normal tax rules.

The new tax treatment to films that commence principle photography has been in play since 1st January.

Film tax relief is only available to Film Production Companies who are engaged in the making of:

·      British Films

·      Theatrical releases

·      At least 25% of core expenditure is incurred on goods or services used or consumed in the UK.

Film production companies that can claim film tax relief are entitled to an additional deduction in computing their taxable profits. Film Production Company’s whose additional deduction results in a loss can surrender losses for a payable tax credit.

The additional deductions and the payable credit are calculated on the basis of UK core expenditure up to a maximum of 80% of the total core expenditure of the Film Production Company.

The Manchester Film Tax Credit Unit is a specialist unit of the HMRC who deal with the corporation tax affairs of the majority of companies eligible for Film Tax Credit.

For a Film Production company to qualify the company must be:

·      Responsible for the:

o   Pre-production

o   Principal photography

o   Post production

o   Delivery of the film on completion

·      Be actively engaged in the production planning and decision-making during the pre-production, principal photography and post production stages of the film

·      Directly negotiate, contract and pay for rights, goods and services relating to the film.

Please not that there can only be one film production company per film.


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