FPC10010 - Overview and general definitions: introduction

Finance Act 2006 (FA06)

  • reformed the taxation of the film industry, and
  • introduced a new Film Tax Relief (FTR).

Tax treatment

The new tax treatment:

  • deems the making of each film to be a separate trade and specifies when that trade begins (FPC20000),
  • sets out the income and expenditure to be included in determining the tax treatment of the company, deems such income and expenditure to be revenue in nature and specifies the periods for which expenditure is to be brought into account (FPC20000), and
  • restricts the extent to which losses from that trade can be utilised during and after production of the film, and on cessation of the deemed trade (FPC30000).

These new rules apply only to expenditure on film production by a film production company (FPC) (FPC10110).

If there is no FPC for the film, either because no company meets the required criteria, or because a company would satisfy them but has elected to be treated as not doing so, then the FA06 rules do not apply and any film production activity will be subject to normal tax rules (FPC20010).

For the purposes of the regime ‘film’ is not limited to productions made for the cinema but includes other works as well, for example those made for television or to be shown over the Internet (FPC10100).

Commencement: tax treatment

The new tax treatment applies to films that commence principal photography on or after 1 January 2007.

‘Principal photography’ is an industry term referring to the start of the main actual filming on the production.

Film Tax Relief

FTR also applies to FPCs, but only to those engaged in the making of:

  • a British film (FPC40030)
  • that is intended for theatrical release (FPC40020), and on which
  • at least 10% of core expenditure (FPC50010) is incurred on goods or services used or consumed in the United Kingdom (FPC50050).
  • Films where principal photography was completed prior to 1 April 2014 were required to incur at least 25% of core expenditure on goods or services used or consumed in the UK.

Those FPCs that are entitled to FTR can claim:

  • an additional deduction in computing their taxable profits (FPC55010), and
  • where that additional deduction results in a loss, to surrender losses for a payable tax credit (FPC55100).

Both the additional deduction and the payable credit are calculated on the basis of UK core expenditure (that is expenditure on pre-production, principal photography and post-production) up to a maximum of 80% of the total core expenditure by the FPC.

The levels of the additional deduction and payable credit are dependent of the size of the film’s budget for periods up to 1 April 2015.

Commencement: FTR

FTR is available to films that:

  • commenced principal photography on or after 1 January 2007; or
  • commenced principal photography before 1 January 2007, but were still uncompleted then (FPC90000).

Previous reliefs for film-making

The regime introduced by FA06 replaced previous reliefs relating to film-making. Guidance on those earlier reliefs can be found at BIM56000.