Film Tax Relief commenced on the 1st January 2007 and is available to film production companies within the charge to Corporation Tax.
Subject to the production company and the film meeting the qualifying conditions as set out in the legislation in Finance Act 2006 (see link) and subsequent amendments.
How does FTR work?
FTR works by enhancing expenditure incurred in the development process and creates an additional deduction to be set against the profit or, where it extends or creates a loss, allows that loss to be surrendered to HMRC for a payable tax credit thus providing the company with either a reduction in their corporation tax liability or a repayable tax credit.
A company will qualify if:
- It qualifies as the Film Production Company (FPC)
To qualify as the FPC it must:
- be incorporated in the UK or have a UK permanent establishment that falls within the charge to UK corporation tax
- be actively engaged in 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.
A film will qualify if:
- it passes the cultural test or qualifies as an official co-production
- it is intended for theatrical release
- at least 10% of the total production costs relate to activities in the UK
- the first day of principal photography took place on or after 1 January 2007.
Passing the BFI Cultural Test:
The BFI Cultural Test is points-based, with sections relating to content, cultural contribution, location, and cast and crew.
Projects need to achieve at least 18 from a possible 35 points.
The sections are:
- Cultural content
- Cultural contribution
- Cultural hubs
- Cultural practitioners.
For further guidance:
https://www.bfi.org.uk/supporting-uk-film/british-certification-tax-relief/cultural-test-film
Qualifying as an official Co-production:
- There must be a UK production company responsible for all UK elements of the production from beginning to completion
- There must also be corresponding production companies in the other co-producing party countries
- There must be a co-producer in each country and an application lodged in each country
- Films, including those made under official co-production treaties, must reach a minimum UK spend requirement of 10%.
The UK currently has eleven active bilateral treaties. http://www.bfi.org.uk/film-industry/british-certification-tax-relief/co-production
Which expenditure qualifies for enhancement?
Expenditure qualifying for enhancement is called Core expenditure and includes expenditure incurred on:
- pre-production
- principal photography
- post-production.
Non-qualifying or non-core expenditure include costs relating to:
- development
- distribution
- other non-production activities.
How is FTR claimed?
FTR is claimed through the Company Tax system which means that claims must be made within a Company Tax Return or an amendment to a Company Tax Return.
Claims must include computations in respect of all qualifying productions and detail the income received and the expenditure incurred.
The expenditure should be split between core and non-core and information should be provided of any apportionments used.
As specialists in Film Tax Relief, we are here to help you achieve the maximum benefit available whilst making the process as simple as possible.