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HMRC internal manual

Film Production Company Manual

HM Revenue & Customs
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Avoidance and disclosure: avoidance - undervaluation of core expenditure


The extent to which Film Tax Relief (FTR) is available is in part dependent on the amount of core expenditure on a film. Limited-budget films are entitled to more generous relief than large budget films up to 1 April 2015. The distinction was removed by FA15. (FPC55030).

To prevent the size of the budget being artificially suppressed, in determining the size of a film’s budget,

  • where goods or services included within the film’s core expenditure are being supplied as a result of transactions entered into (directly or indirectly) between connected persons, and
  • the amount of core expenditure might have been expected to be greater if the transaction had been between independent parties, then
  • the amount of the expenditure should be established by reference to what the arm’s length value would have been had the parties been unconnected

The rules for connected persons which should be applied for this purpose are those set out in CTA2010/S1122 and S1123.