FPC60028 - Additional Information Form – section 5: redemption of credit

Note that this page does not apply to Film Tax Relief. The form will not ask for a breakdown of credit redemption steps for claims to Film Tax Relief.

All claims to a Creative Industry Expenditure credit must include a full computation showing how the credit is to be redeemed under the six credit redemption steps. This computation must be uploaded as an attachment in Section 5 of the additional information form.

HMRC has produced a stencil to assist customers in working through the steps, which can be uploaded to meet the requirement.

The company only has to perform the credit redemption calculation once per accounting period. The company must add together all the amounts of credit due from every production on which the company is claiming Audio-Visual Expenditure Credit (AVEC) and/or Video Games Expenditure Credit (VGEC) for the period.

The form will request the following amounts:

  • Amount of Step 2 brought forward and surrendered AVEC/VGEC used to discharge Corporation Tax liability

This is pre-Step 1. It is any amount of Step 2 restriction brought forward from a previous accounting period, and/or any Step 2 or Step 4 amounts of AVEC/VGEC that another group company is surrendering to the claimant company. If a surrendered amount is included, both the surrendering company and recipient company should include details in their computations.

On the HMRC template, it is the figure from box A5.

  • Total AVEC and VGEC credits

This is the total amount of credits across all AVEC and VGEC claims for the period. The credit amounts used should be the amounts following Step 5 of the amount of expenditure credit calculation (s1179CA) – the company’s qualifying expenditure for the period multiplied by the appropriate credit rate.

On the HMRC template, it is the figure from box B1.

  • Step 1: Amount used to discharge Corporation Tax (CT) liability of the period

The company must first set its credit against any CT liability of the accounting period. If there is no CT liability, then 0 should be entered in this box.

On the HMRC template, it is the figure from box B5.

  • Step 2: Amount withheld

This step restricts the potential payable element and ensures that loss makers receive the same net benefit as profit makers (the credit being taxable). This is achieved by retaining a notional tax so the total cash benefit for all claimants is equal to the expenditure credit, net of tax at the main rate of Corporation Tax.

If the amount of credit remaining after Step 1 exceeds the original amount of credit minus the notional tax charge, the difference between the two is withheld here at Step 2. Amounts withheld can still be used against Corporation Tax liabilities (s1179CD).

On the HMRC template, it is the figure from box C4.

  • Step 3: Amount used to discharge CT liability of another accounting period

Any amount remaining after step 3 is used to discharge any outstanding Corporation Tax liabilities (due but not settled) of the company for any other accounting period(s).

On the HMRC template, it is the figure from box D1.

  • Step 4: Amount surrendered to group members

If the company is a member of a group it may choose to surrender the whole, or any part remaining after Step 3, to any other group member. For the surrender rules, see section 1179CE of CTA 2009. For the definition of a group member, see section 152 of CTA 2010.

On the HMRC template, it is the figure from box E1.

  • Step 5: Amount used to discharge any other company liabilities

Any amount remaining after Step 4 is used to discharge any other liability of the company to pay a sum to the Commissioners, for example VAT, tax on loans to participators (s455 tax) or liabilities under any contract settlement.

On the HMRC template, it is the figure from box F3.

  • Step 6: Payable credit claimed

The final amount remaining after Steps 1 to 5 is payable to the company, provided that it is not in administration or liquidation (see section 1179CG of CTA 2009).

On the HMRC template, it is the figure from box G2.

  • Amount surrendered to other group companies

The company can choose to surrender to another group member any Step 2 amount not used at the pre-step 1 restriction, including any amount withheld at Step 2 in the current period. See section 1179CD of the Corporation Tax Act 2009.

On the HMRC template, it is the figure from box H3.