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HMRC internal manual

Film Production Company Manual

HM Revenue & Customs
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Overview and general definitions: meaning of ‘film-making activities’, ‘production expenditure’ and ‘core expenditure’

CTA09/S1183, S1184

Film-making activities

For the purposes of the tax regime for film production introduced by FA06, film-making activities means the activities involved in:

  • development,
  • pre-production,
  • principal photography and
  • post-production.

In the case of films whose production involves computer-generated imagery (CGI), those activities are treated as equivalent to principal photography.

Production Expenditure

Production expenditure is expenditure is expenditure on the four film-making activities (described further below)

Core expenditure

Film Tax Relief (FTR) is not provided on total production expenditure, but is limited to core expenditure. It comprises expenditure on:

  • pre-production,
  • principal photography and
  • post-production.

So core expenditure excludes any expenditure incurred on development, distribution or other non-production activities.

Stages of film production

1 Development

Film development is the stage in the creation of a film in which the project progresses from the initial concept to the point at which a decision can be taken whether or not it should proceed.

During development all the necessary elements are assembled to enable a studio or independent producer to make a judgement on whether the film is a viable commercial project.

2 Pre-production

Pre-production is the stage of film production where activity begins to be directed towards actually making the film. Whilst it is difficult to be categorical about the specific activities which fall within pre-production in all circumstances, typical activities include:

  • securing the necessary permission for the use of film locations;
  • booking of studio facilities;
  • acquiring props;
  • set construction;
  • costume-making;
  • engaging cast and crew.

3 Principal photography

Principal photography is the stage at which the film is actually shot and is usually the most expensive part of film production.

4 Post-production

The post production phase of the film is where soundtracks are enhanced or added, visual effects generated and the film edited for release.

Eventually, the film is brought to a stage where it can be shown to the public as a finished work.

In cases where an FPC has been commissioned to make a film the completed film would be delivered by the FPC. The FPC will be required by its contract to deliver a specified list of items (for example, master version in particular formats) and the costs of producing those which relate to theatrical exploitation would normally be part of production expenditure (and of core expenditure.)

Animated films

The way in which an animated film (whether the images are drawn, generated by computer, or by traditional stop-motion) is produced can be very different from the model described above, which is based on live action films. For example, the various stages of production (especially after pre-production) are intertwined and do not follow the same sequence as a live action film (i.e. pre-production, shoot, post production). Parts of post production for an animated film happen before the animation equivalent of principal photography (the soundtrack, or an approximation thereof, will be used to guide the animation of the characters). And the screenwriter will be more intensively - and more iteratively - involved in the later stages of production.