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HMRC internal manual

Film Production Company Manual

Calculation: surrenderable losses and Film Tax Credit

CTA2009/S1201 & 1202

A film production company (FPC) has the option of claiming Film Tax Relief (FTR) as a payable tax credit - a payment direct from HMRC. It can do so in any period in which it has a surrenderable loss.

The company may surrender all or part of its surrenderable loss.

The amount of the surrenderable loss

The amount of the ‘surrenderable loss’ for any accounting period is the lesser of:

  • the amount of the trading loss in the period (taking account of the additional deduction); and,
  • the enhanceable expenditure (FPC55020) for that period (i.e. the lesser of core UK expenditure or 80% of total core expenditure) less any amount surrendered in previous periods).

Note that for a large budget film (i.e. a film that is not a limited-budget film (FPC10160))- for which the rate of enhancement applied to the enhanceable expenditure to generate the additional deduction is 80% (FPC55030) - the amount of the surrenderable loss may be greater than the amount of the additional deduction. In such a case the company can surrender a greater amount of loss than the additional deduction. In other words it can surrender not only the loss attributable to the additional deduction but also some ‘ordinary’ loss.

The calculation of a surrenderable loss was amended by s14 Finance (No 3) Act 2010. This amendment applies to accounting periods ending on or after 9 December 2009 and in relation to those periods is treated as always having had effect.

The surrenderable loss now becomes the lesser of

  • the amount the company’s available loss for the accounting period; and
  • the enhanceable expenditure (FPC55020) for that period (i.e. the lesser of core UK expenditure or 80% of the total core expenditure less any amount surrendered in previous periods).

The available loss is the sum of the loss for the period plus any relevant unused loss brought forward. The relevant unused loss is any available loss for previous periods not surrendered under s1202 (1) or carried forward under s45 CTA 2010 and set against profits of the separate film trade.

The amount of payable credit

The amount of the payment is the payable credit rate multiplied by the amount of loss surrendered.

The payable credit rate is dependent of the size of the film’s budget:

  Payable credit rate
Limited-budget films 25%
Other films 20%