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HMRC internal manual

Film Production Company Manual

Taxation: profit/loss calculation - expenditure - timing

CTA2009/S1189 and S1192

The rules for the timing of expenditure recognition ensure that costs are recognised when they are represented in the state of completion of the film and, in particular that:

  • payments made in advance of the goods or services being supplied (prepayments) are ignored until the work has been carried out; and
  • work is done or services supplied in exchange for the promise of payment in the future(deferred payments) are recognised to the extent that the work is represented in the state of completion.  The costs incurred on the film are taken to include an amount that has not been paid only if the obligation to make a future payment is unconditional.

There are additional anti-avoidance rules to prevent companies inflating claims to Film Tax Relief (FTR) with payments that remain unpaid for long periods (FPC80040). These apply only for the purposes of FTR only. They are not relevant to determining expenditure for the purpose of CTA2009/Part 15 Chapter 2.


In the film industry, payments for goods and/or services are sometimes contingent on the film making a profit. In other words the amount the supplier is to be paid is linked to the success of the project and they will begin to be paid these amounts if, or when, the film generates sufficient income. In that case the costs are recognised if, or when, the income on which they are to be based is also recognised.

Film Tax Credits due or paid to the FPC in connection with a film are not regarded as income earned from the film.

See FPC80040 for a worked example involving and FTR claim and deferred, contingent expenditure.