FPC55110 - 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 (). In each case the production is completed within a single period.

The rate of enhancement applying to all films is 100%, but a maximum of 80% of core expenditure is eligible for relief (FPC55030).

Example 1

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. So in this example

  • Income = £9m
  • Expenditure = (£10m)
  • Pre-FTR profit (loss) = (£1m)
  • Additional deduction - lesser of UK core expenditure (£10m) and 80% of total core expenditure (80% x £10m) = (£8m)
  • Post-FTR profit (loss) = (£9m)

The surrenderable loss is the lesser of:

  • the available loss for the period: £9m and,
  • the amount of the additional deduction for the period: £8m.

In this case, the film production company can surrender up to £8m.

The amount of credit due is:

  • the payable credit rate 25%
  • multiplied by
  • the loss surrendered of £8m,

giving a payment of £2m (assuming that the maximum amount of loss is surrendered). This is equal to 20% of the total core expenditure. The company still has a loss of £1m not attributable to FTR.

Example 2

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 £105m for it. So in this example

  • Income = £105m
  • Expenditure = (£100m)
  • Pre-FTR profit (loss) = £5m
  • Additional deduction - lesser of UK core expenditure (£100m) and 80% of total core expenditure (80% x £100m) (UK core expenditure of £100m x 80%) = (£80m)
  • Post-FTR profit (loss) = (£75m)

The surrenderable loss is the lesser of

  • the available loss for the period: £75m and
  • the amount of the additional deduction for the period: £80m.

In this case, the film production company can surrender up to £75m.

The amount of credit due is:

  • the payable credit rate 25%
  • multiplied by
  • the loss surrendered of £75m,

giving a payment £18.8m (assuming that the maximum amount of loss is surrendered). This is equal to 18.8% of the total core expenditure. Although the company has made a profit prior to the application of FTR, it now has no corporation tax liability.