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HMRC internal manual

Corporate Finance Manual

From:
HM Revenue & Customs
Published:
16 April 2016
Updated:
27 August 2026 - See all updates

CFM95740 - Interest restriction: tax-EBITDA: Film Tax Relief

TIOPA10/S407(3)(e)

Deductions for Film Tax Relief under CTA09/S1199 and Film Tax Credits claimed under CTA09/1202, are excluded from the calculation of adjusted corporation tax earnings when determining a company's tax-EBITDA.

Qualifying Companies which are directly involved in the production and development of a film, and meet the necessary criteria, can claim:

  • an additional tax deduction of 100% of qualifying expenditure incurred on the pre-production, principal photography and post production of the film;
  • if a loss is surrendered, a repayable tax credit of 25% of the loss up to the amount of qualifying expenditure.

Effect for tax-EBITDA purposes

Film Tax Relief is one of the qualifying tax reliefs specified as an excluded amount in TIOPA10/S407(3).

Any additional deductions received over and above the actual amount of qualifying expenditure incurred would have a distorting effect of reducing the earned profit of the company for tax-EBITDA purposes, decreasing the group's interest capacity.

Conversely, the receipt of a tax credit of 25% of a surrendered loss would have the effect of increasing a group's interest allowance if included as an income item for tax-EBITDA purposes. This would serve to increase the benefit received for companies claiming Film Tax Relief beyond the intention of the original relief.

Consequently, additional deductions and tax credits received under s1199 and s1201 respectively, should not be brought into account when calculating taxable total profits of the period to determine a company's tax-EBITDA.

Finance Act 2024 changes to creative reliefs

FA 2024 introduced changes to creative reliefs:

  • It phases out the Film Tax Relief under CTA09/S1199 and Film Tax Credits under CTA09/S1202, with these ceasing for accounting periods beginning on or after 1 April 2027.
  • It replaces these with the new Audio-Visual Expenditure Credit (AVEC), which can be claimed on expenditure incurred from 1 January 2024.

For further guidance see the Creative Industries Expenditure Credits manual, in particular CREC021000 for details of which films qualify for AVEC, and CREC09000 for commencement and transitional rules.

The CIR rules do not reference the new expenditure credits and, therefore, they do not exclude AVEC from the calculation of tax-EBITDA. As a result, when calculating tax-EBITDA, any expenditure credits received should be included.