Enter Your E-mail

HMRC have published the final version of their guidance on the new film tax relief, and this can now be used for making claims.

New rules for the taxation of film production, and in particular a new enhanced tax relief (film tax relief) for the production of British cinema films, were introduced by Finance Act 2006. They apply to films which commenced principal photography on or after 1 January 2007 and to films starting principal photography before 1 January 2007, but uncompleted then.

Film tax builds on new rules for calculating the profits and losses of film production companies for tax purposes. These new rules, like the ones which they replace, apply to all film production companies whether or not they are producing films intended for release in the cinema.

Relief for British film production was previously provided by Finance (No.2) Act 1992, ss 40A to 43, Finance (No.2) Act 1997,  s 48; and Income Tax (Trading and Other Income) Act 2005, ss 130 to 144. According to HMRC, a review of these reliefs concluded that they were no longer an effective means of delivering the Government’s objectives for the British film industry, and the new film tax relief was subsequently introduced in Finance Act 2006.

The relief is aimed directly at film production companies and is not available to those whose only involvement in film making is confined to providing or arranging finance.

In order to qualify, a film must meet the following three conditions. It must:

• be made to be shown commercially in cinemas;
• be certified as British either because it is an official co-production or because it satisfies a new cultural test administered by the Department for Culture Media and Sport; and
•  incur at least 25% of its total production expenditure on film making activities in the UK.

British films costing £20 million or less are eligible for an additional tax deduction of 100% of qualifying UK expenditure and to surrender losses in exchange for a cash payment of 25%, amounting to a benefit worth at least 20% of qualifying production costs. Other British films will receive an additional deduction of 80% of qualifying UK expenditure and will be able to surrender losses in exchange for a cash payment of 20%, amounting to a benefit worth typically 16% of qualifying production costs.

Link

HMRC: Film tax relief guidance