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HMRC internal manual

# Calculation: surrenderable losses and Film Tax Credit - examples - single-period productions

The following examples illustrate how film production companies (FPCs) that sustain a surrenderable loss can surrender that loss in return for a payable tax credit (FPC55100). In each case the production is completed within a single period.

## Example 1: Limited-budget film

An independent FPC makes a film with total core expenditure of £10m, all of which is UK expenditure. The film was commissioned by an unrelated distributor which pays £9m for it.

 Income £9m Expenditure £10m Pre-FTR profit (loss) (£1m) Enhanceable expenditure £8m (UK core expenditure of £10m x 80%) Additional deduction (£8m) (Rate of enhancement applied to enhanceable expenditure = 100%) Post-FTR profit (loss) (£9m)

The surrenderable loss is the lesser of

• the trading loss: £9m and
• the enhanceable expenditure on which the additional deduction for period: £8m.

In this case, the film production company can surrender up to £8m.

The amount of credit due is:

the payable credit rate (for a limited-budget film): 25%

multiplied by

the loss surrendered: £8m,

giving a payment £2m (assuming that the maximum amount of loss is surrendered). This is equal to 20% of the total core expenditure.

## Example 2: Large budget film

An independent film production company (FPC) produces a film with total core expenditure of £100m, all of which is UK expenditure. The film was commissioned by an unrelated distributor which pays £84m for it.

 Income £85m Expenditure £100m Pre-FTR profit (loss) (£15m) Enhanceable expenditure £80m (UK core expenditure of £100m x 80%) Additional deduction (£64m) (80% x Enhanceable expenditure of £80m) Post-FTR profit (loss) (£79m)

The surrenderable loss is the lesser of

• the trading loss: £79m and
• the enhanceable expenditure on which the additional deduction for period: £80m.

In this case, the film production company can surrender up to £79m.

The amount of credit due is the credit rate of 20% multiplied by the loss surrendered, giving a payment of £15.8m (£79m x 20%). This is equal to 15.8% of the total core expenditure.

The amount of credit due is:

the payable credit rate (for a large-budget film): 20%

``````multiplied by
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the loss surrendered: £79m,

giving a payment £15.8m (assuming that the maximum amount of loss is surrendered). This is equal to 20% of the total core expenditure.

The FPC would therefore make a profit, post tax, of £800,000