Companies that produce films (including television and video productions) are subject to special tax rules (see part 15 of the Corporation Tax Act 2009) which determine how the taxable profits of the film-making activities are to be calculated and how any losses may be applied.
These rules apply to all film production companies whether or not they are producing films intended for release in the cinema.
Some films are eligible for Film Tax Relief (FTR). This relief can increase the amount of expenditure that is allowable as a deduction for tax purposes or, if the company makes a loss, can be surrendered for a payable tax credit.
The films that qualify for the relief are British films that are intended to be shown commercially in cinemas and of whose total production costs at least 25% relate to activities in the UK.
Film production companies can opt out of these rules if they wish. Their films will not then be eligible for the additional relief for British cinema films.
A film is British for these purposes if it meets a 'cultural test' or qualifies by virtue of an internationally agreed co-production treaty. Qualification is administered by the British Film Institute (BFI) on behalf of the Department for Culture Media and Sport.
The Film Production Company (FPC) responsible for the production of the film can apply for an interim certificate that the film is British at any point before or during production, to BFI. The FPC can then make a claim for FTR by submitting this certificate with their claim, made in its Corporation Tax Return (CT600) to HM Revenue & Customs (HMRC).
If any 'interim' claim for FTR has been paid by HMRC to the FPC, the FPC must apply for a 'final' British film certificate from BFI, after the film has been completed. The final certificate must be submitted to HMRC. If the FPC does not submit a final certificate, then any FTR paid on the basis of the interim certificate is no longer due and will have to be repaid to the HMRC by the FPC.
No claim can be made without either an interim or final certificate.
'Earlier reliefs as stated below apply for film completed by 31 December 2006.
Detailed guidance on the taxation of film production companies and FTR is available in the Film Production Company Manual.
FPC must meet their obligations to non-permanent, casual and freelance workers in film, television and production industries. General guidance is available for Film, Industry Guidance notes.
HMRC is responsible for the collection of tax, employee and employer's National Insurance contributions and VAT from the employer. HMRC is also responsible for ensuring that employers meet the National Minimum Wage (NMW) requirements.
For further information:
This list is just to help you understand your obligations. It is by no means complete. If you are looking for information that is not contained within the above list please refer to the HMRC website.
There is a specialist unit to deal with most claims for FTR. The Manchester Film Tax Credit Unit will deal with the Corporation Tax affairs of most companies eligible for FTR and will be able to answer queries about the taxation of film production companies and FTR.
The main exceptions to this are cases that are being dealt with by Large Business Service (mainly those which are part of larger groups) which will continue to be dealt with there.
Companies only making films not entitled to FTR will continue to be dealt with by their existing offices.
The address of the unit is:
Manchester Film Tax Credit Unit
Local Compliance S0717
PO Box 3900
Telephone: 0161 288 6310
Email: Manchester Film Tax Credit Unit
The Secretary of State for Culture, Media and Sport certifies films as British on the advice of the BFI, and any enquiries concerning certification should be directed to:
21 Stephen Street
Telephone: +44 (0)20 7173 3214
Email: Anna Mansi
Relief for film production was previously provided by sections 40A to 43 Finance (No 2) Act 1992, section 48 Finance (No 2) Act 1997 and sections 130 to 144 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005).
Queries on particular cases or operational issues should be directed to the Manchester Film Tax Credit Unit.
If you have any general/policy queries regarding the current rules or earlier reliefs for film production, please contact:
CT and Business Income Tax Workstream
HM Revenue & Customs
100 Parliament Street
Email: Nalini Arora