BIM72614 - Partnerships: loss relief restrictions: annual limit: film-related expenditure

The annual limit of £25,000 on the amount of losses for which sideways loss relief can be claimed by limited partners and non-active partners does not apply to losses derived from qualifying film expenditure.

Qualifying film expenditure

Qualifying film expenditure is defined in ITA07/S103D as:

• expenditure deducted under any of sections 137 to 140 ITTOIA 2005, and
• incidental expenditure (not itself deducted under sections 137 to 140 ITTOIA 2005) on management, administration or obtaining finance in connection with production of a film in relation to which expenditure is deducted under those sections.

These sections include the legislation formerly in section 42 Finance (No 2) Act 1992 and section 48 Finance (No 2) Act 1997. Guidance on this legislation is at BIM56325 (section 42 relief) and BIM56380 (section 48 relief).

From 1 January 2007 there is a new tax credit scheme for films, which applies only to film production expenditure incurred by a film company. As part of transitional phasing out arrangements, use of the old reliefs was allowed to continue for certain films for a limited period.

Section 42 relief (ITTOIA/S138 and S138A) is only available for films which commenced principal photography before 1 January 2007. If the relief is for acquisition expenditure, the film must be acquired before 1 October 2007.

Section 48 relief (ITTOIA/S139 and S140) is only available for films which commenced principal photography before 1 April 2006 and were completed before 1 January 2007. If the relief is for acquisition expenditure, the film must be acquired before 1 October 2007.

Film GAAP schemes

The annual limit applies to losses derived from other (non-qualifying) film-related expenditure. In particular it does apply to losses derived from deductions made for revenue expenditure in accounts of film partnerships prepared in accordance with generally accepted accounting practice (GAAP schemes).