FPC55110 - Film Tax Relief: Calculation: Surrenderable losses and film tax credit: Examples - single-period productions
The following examples illustrate how film production companies
(FPCs) that sustain a surrenderable loss can surrender that loss in
return for a payable tax credit (
FPC55100). In each case the production
is completed within a single period.
Example 1: Limited-budget film
An independent FPC makes a film with total core expenditure
of £10m, all of which is UK expenditure. The film was
commissioned by an unrelated distributor which pays £9m for
it.
| Income | £9m | |
| Expenditure | £10m | |
| Pre-FTR profit (loss) | (£1m) | |
| Enhanceable expenditure | £8m | |
| (UK core expenditure of £10m x 80%) | ||
| Additional deduction | (£8m) | |
| (Rate of enhancement applied to enhanceable expenditure = 100%) | ||
| Post-FTR profit (loss) | (£9m) |
The surrenderable loss is the lesser of
- the trading loss: £9m and
- the enhanceable expenditure on which the additional deduction for period: £8m.
In this case, the film production company can surrender up to
£8m.
The amount of credit due is:
the payable credit rate (for a limited-budget film): 25%
multiplied by
the loss surrendered: £8m,
giving a payment £2m (assuming that the maximum amount of
loss is surrendered). This is equal to 20% of the total core
expenditure.
Example 2: Large budget film
An independent film production company (FPC) produces a film
with total core expenditure of £100m, all of which is UK
expenditure. The film was commissioned by an unrelated distributor
which pays £84m for it.
| Income | £85m | |
| Expenditure | £100m | |
| Pre-FTR profit (loss) | (£15m) | |
| Enhanceable expenditure | £80m | |
| (UK core expenditure of £100m x 80%) | ||
| Additional deduction | (£64m) | |
| (80% x Enhanceable expenditure of £80m) | ||
| Post-FTR profit (loss) | (£79m) |
The surrenderable loss is the lesser of
- the trading loss: £79m and
- the enhanceable expenditure on which the additional deduction for period: £80m.
In this case, the film production company can surrender up to
£79m.
The amount of credit due is the credit rate of 20% multiplied
by the loss surrendered, giving a payment of £15.8m (£79m
x 20%). This is equal to 15.8% of the total core expenditure.
The amount of credit due is:
the payable credit rate (for a large-budget film): 20%
multiplied by
the loss surrendered: £79m,
giving a payment £15.8m (assuming that the maximum amount
of loss is surrendered). This is equal to 20% of the total core
expenditure.
The FPC would therefore make a profit, post tax, of
£800,000
