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HMRC internal manual

Film Production Company Manual

HM Revenue & Customs
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FA06/Chapter 3: Commencement & Transition: Principal photography started before 1 January 2007

Films that commence principal photography on or after 1 January 2007 will all be taxedaccording to the new rules in FA06. Some of those that commenced principal photographybefore that date will also fall within the regime.

Films completed before 1 January 2007

The FA06 reliefs do not apply to films that were completed before 1January.

Such films are taxed according to the previous rules. In accordance with SI2006/643, whichintroduced the original cultural test for British films, where such a film needs to becertified as British (e.g. for the purposes of F2A92/S42) the test that will apply dependson when principal photography began;

  • if it began before 1 April 2006, then the relevant test is the “70% test” in Schedule 1 of the Films Act 1985 as it stood before being modified by SI2006/643;
  • if it began on or after 1 April 2006, then the test is that introduced by SI2006/643 (First Cultural Test).

Films still in production at 1 January 2007 (overlapping films)

If, at the time principal photography began, a film was intended for theatricalrelease, and if it is certified as British – either under a co-production agreementor under the second Cultural Test – then the new provisions in FA06 apply.

If, upon application, the film is refused certification under the second Cultural Test,then it is taxed instead according to the old rules. This includes the possibility of FilmTax Relief (FTR) if the film is British. Where a film needs to be certified as British forthis purpose, the test that will then apply is the First Cultural Test but without therequirement that the maker of the film be resident in the EU.

SI1050/2007, which sets out these provisions, makes two other changes only for overlappingfilms

  • it removes the requirement, for overlapping films starting principal photography before 1 April 2007, that the film production company be involved in pre-production (FPC10130), and
  • it delays from 1 October 2007 to 31 March 2008 the date by which, to attract relief for acquisition expenditure under F2A92/S42, ITTOIA2005/S135 or ITTOIA2005/S138A , the acquisition must be made.