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HMRC internal manual

Film Production Company Manual

Taxation: separate trade - commencement


Where a company is a film production company (FPC) (FPC10110) for the purposes of the film tax regime , the production of each film (FPC10100) is treated as a separate trade. This isolates films on an individual basis for the purpose of calculating profits and losses.

The point at which this trade starts is determined by special rules but, once set up, the normal rules apply for when a trade ceases.

The normal rules for deciding when a trade commences do not apply when deciding when a trade of film production commences and special rules apply instead. The FPC is treated as commencing a new trade:

  • when pre-production commences, or
  • when any income from the film is received

whichever is earlier.

Commencement triggered by pre-production expenditure

Normally the trade of film production will commence when the film begins pre-production (FPC10130).

This means that as soon as the FPC begins to incur pre-production expenditure, a separate film production trade relating to that film begins. Income and expenditure relating to the film is then accounted for in relation to that trade using the rules in CTA2009/Part 15 Chapter 2 (but see FPC20120) for how development costs can be brought into the film production trade).

The different stages of film production (development, pre-production, principal photography and post-production - FPC10130) are not necessarily sequential and may well overlap. It is therefore quite possible that expenditure on pre-production activities can trigger the commencement of the film production trade while development expenditure is still being incurred.

Commencement triggered by receipt of income

In some cases, the trade will initiate before pre-production starts if the FPC receives income relating to the film (see FPC20210).

Setting up the trade on the receipt of film income ensures that all film income is included so that film expenditure can be set against it. For instance, the commencement of the trade may be triggered when an FPC receives a grant to help fund development activity.