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HMRC internal manual

Film Production Company Manual

Film Tax Relief: Eligible Expenditure: Leading actors

CTA2009/S1185; CTA2009/S1200

In order to determine the amount of Film Tax Relief (FTR) to which a film production company (FPC) is entitled it is necessary to determine:

  • the extent to which expenditure falls within the definition of core expenditure (FPC50010), and, to the extent that it does,
  • where the goods or services to which the expenditure relates are used or consumed (FPC50050).

This can present particular issues in relation to payments for services rendered by principal actors (and some other leading participants). How much (if any) of the expenditure relates to services provided during principal photography (as opposed to other stages of production)? And, how much (if any) of the expenditure relates to services rendered in promoting the film?

In each case these determinations must be made on a fair and reasonable basis by reference to the particular facts of the case. But, without ruling out alternative treatments, HMRC will generally accept determinations based on the following principles.

Actors paid mainly by reference to time

Where payments to actors and extras are determined mainly by reference to time spent on (or committed to) rehearsals, principal photography and (possibly) post-production it will be reasonable for the costs be apportioned across the various stages of production in a similar fashion.

Lead actors whose payment is largely independent of time

But where the amount paid to a well-known actor is largely independent of time spent to (or committed to) working on the film it would be reasonable to regard the actor as primarily being paid for their acting performance during principal photography.

Such an actor will probably participate in pre-production rehearsals, and may devote time to the promotion or publicity of the completed film (indeed may be contractually required to do so). But it would normally be reasonable allocate the whole of the fee to acting services consumed during principal photography and disregard any incidental value derived from time spent preparing for filming or promoting the completed film.

There may be exceptions to this general principle, for example:

  • Payments to principal actors for work done on animated productions will not necessarily be attributed to principal photography (FPC10130).
  • If an actor’s fee were inflated to cover costs (travel, accommodation, etc) to be borne by them during the promotion of the film, the additional payment can not reasonably be included as core expenditure.
  • If the level of an actor’s participation in principal photography is so low (and their fee so disproportionately high) it may be apparent that their contribution to the film is mainly one of ‘celebrity’ or ‘association’ - a star name on the billboards, certainty of media coverage, etc. In such cases it would be unreasonable to allocate their entire fee to principal photography.

If it is an FPC’s interest to allocate part of the overall fee paid to a principal actor to activities other than principal photography HMRC would expect them to undertake the necessary work to establish and agree with HMRC an alternative allocation.

Interaction with Foreign Entertainers Unit (FEU)

FEU have responsibility for agreeing the taxation of foreign actors appearing in UK productions. In agreeing the tax position FEU may allow deductions for expenses, which the actor has incurred, from the gross fee payable by the FPC.

Any such deductions allowed have no effect on the amount the FPC can claim as core expenditure. This will remain the gross fee, subject to any restrictions for non-UK expenditure.