UK film production companies could claim back on tax up to 20%

Film tax relief (FTR) allows UK film production companies to claim enhanced tax relief on preproduction, principal photography and post-production expenditure.

The relief is intended to encourage the production of culturally British films in the UK.

Who can make a tax relief claim?

To qualify for FTR you must be responsible for all of the following:
  • the pre-production, principal photography, post-production and delivery of the film on completion;
  • actively engaging in production planning and decision-making during the pre-production, principal photography and post-production stages of the film;
  • directly negotiating, contracting and paying for rights, goods and services in relation to the film.
These requirements are relaxed in respect of qualifying co-productions.

The tax benefit

Where a film production company is profitable, the FTR claim reduces its tax liability by up to an additional 15.2% of the qualifying costs.

Where a company is loss-making, or doesn’t pay corporation tax (for example, due to prior year losses), a tax credit at a rate of up to 20% of the qualifying costs is repayable to the company.

What films are eligible for tax relief?

To qualify for FTR a film must meet the following three conditions:
  • the film must be intended for theatrical release;
  • the film must be certified as a British film;
  • at least 10% of the ‘core expenditure’ on the production must be spent on goods or services that are provided from within the UK.
To be considered a British film, it must pass a cultural test or qualify through an internationally agreed co-production treaty – certifying that the production is a British film. In all cases, formal certification is required to qualify.

Certification and qualification is administered by the British Film Institute (BFI) on behalf of the Department for Digital, Culture, Media and Sport.

What costs can be included in your claim?

Expenditure on film-making activities eligible for the enhanced tax deduction includes expenditure on pre-production, principal photography and post-production incurred from the start of the development until the final delivery of the completed film.

Expenditure on development, distribution or other nonproduction activities isn’t eligible for FTR.

If I claim FTR, can I also claim R&D tax relief?

Yes, companies that claim FTR may also claim R&D tax relief in certain circumstances. However, where a small or medium-sized (SME) company claims FTR in respect of a project, it cannot claim SME R&D tax relief on the same project, as two sets of state aid reliefs cannot be claimed on the same project.

For companies which carry out R&D and claim under the Research and Development Expenditure Credit (RDEC) scheme, the rules are different. This is because R&D tax relief claimed under the RDEC scheme isn’t state aid, and therefore the areas of research and development may be eligible for relief under both the FTR and RDEC schemes.

How we can help

Our specialist team can assist you to structure your entity to ensure that it qualifies for relief, consider which of your films qualify, identify the costs that are eligible for relief and manage the application process on your behalf.

In addition, we can assist you to optimise the tax relief claims, by identifying costs eligible for RDEC as well as FTR.

If you require any advice on the matters noted above, please contact Aimee Griffiths.

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