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HMRC internal manual

Film Production Company Manual

From
HM Revenue & Customs
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Overview and general definitions: meaning of ‘limited-budget film’

CTA2009/S1184, S1215

For Until 1 April 2015 for the purposes of the tax regime for film production introduced by FA06, limited-budget films are entitled to receive higher rates of both additional deduction and payable tax credit (FPC50000).

Basic definition

A limited-budget film is one whose total core expenditure is £20m or less. See FPC50010 for the meaning of ‘core expenditure’.

The test operates by reference to all core expenditure on the film, whether by the film production company (FPC) or other parties involved in the film-making activities.

Interim accounting periods

Whether a film qualifies as a limited-budget film cannot be determined until after the end of the accounting period in which the film is completed or abandoned (the ‘final accounting period’).

But tax returns for any earlier periods (‘interim accounting periods’) can include claims to Film Tax Relief (FTR) based on the reliefs available to limited-budget films if they include a statement of planned core expenditure that indicates that on completion of the film the amount of actual core expenditure will be less than £20m.

Claims for interim accounting periods will be revisited, and FTR claims appropriately revised, if it turns out the final amount of core expenditure exceeds £20m but claims have been made as if the limited-budget condition would be met.

Final statement of the core expenditure on the film

The tax return for the final accounting period must:

  • indicate that the film has been completed or abandoned, and
  • include a final statement of the core expenditure on the film.

The final statement of core expenditure should include all core expenditure on the film (whether by the FPC or other parties involved in its production). It should take account, as far it is possible to estimate such amounts with reasonable certainty, of the amount of any deferred payments of core expenditure that can be expected to be paid out in the future (whether by the FPC or other parties).

Later accounting periods

The question of whether or not a film is a limited-budget film is determined by reference to the final statement of the core expenditure on the film.

It is possible that if the FPCs deemed trade continues into accounting periods beyond the ‘final accounting period’ (e.g. because it continues to retain and exploit an interest in the film) subsequent amounts paid out as deferred payments may exceed the amount of such payments included on an estimated basis within the final statement of the core expenditure. Provided that the original estimates were reasonable in the circumstances in which they were made, the limited-budget status of the film will not be revisited in the light of subsequent events.

Anti-avoidance

There is an anti-avoidance rule to prevent payments between connected persons from being understated in order to manipulate the cost of films below the ‘limited-budget’ threshold (FPC80030).