Film Tax Relief

Film Tax Relief (FTR), is a creative industry tax relief incentive, funded by the UK government.

FTR supports UK Film Production Companies by offering them a tax rebate against the money they spend on the pre-production, principal photography and post-production of a new film.

The tax relief works by deeming that the making of each film is a separate trade and specifies when that trade begins and ends.

It sets out the income and expenditure to be included in determining the profits and losses of that trade.

The company can then claim an additional deduction when calculating its taxable profits. Where that additional deduction results in a loss, this loss can be surrendered for a payable tax credit.

You can claim film tax relief on your film if:

• The British Film Institute (BFI) has certified it as British. This is achieved via a cultural test completed online.
• The film is intended for theatrical release. This means an exhibition for the paying public at the commercial cinema.
• At least 25% of the film's core expenditure must relate to UK activities.
• In the case of a co-production, the 25% expenditure condition is applied to expenditure incurred by all the co-producers.

The legislation defines a film as "any record, however, made, of a sequence of visual images capable of being used to show that sequence as a moving image."

A Film Production Company (FPC) is the company that makes a film. The purpose of the tax relief is to support film production activity rather than its creative gestation.

To qualify as a film production company, the company must be responsible for the following:

• Pre-production;
• Principal photography;
• Post-production;
• Delivery of the film on completion.

There can not be more than one film production company per film.

If your film is produced under the terms of an international co-production agreement between two or more countries or authorities, you can access support provided to the national cinema in each co-producing country. This includes tax relief where available.

The co-production must be certified as a British film by meeting the requirements of one of the UK’s international bilateral co-production agreements or the European Convention on Cinematographic Co-Production (ECCC).

If your film does not meet these terms, it will not be treated as a co-production for the purposes of FTR and, therefore, can only be certified as British by meeting the requirements of the BFI Cultural Test, Schedule 1 of the Films Act 1985.

There are three ways in which a film can be classified as British. Firstly, it can pass the cultural test set by the British Film Institute (BFI). Secondly, it can meet the terms of one of the UK’s bilateral co-production treaties. Finally, it can meet the European Convention on Cinematic Co-Production terms.

In each case, the film must be formally certified. Reach out to Myriad to find the best way for your Film Production Company to complete this step.

If you want to claim Film Tax Relief, your film must be certified as British under one of the three ways described above. If your film is not a co-production, you must pass the British Film Institute (BFI) cultural test to receive certification.

To pass the BFI cultural test, complete an online application form for each film you want to claim FTR. The BFI will assess your application and award points based on the cultural content of the film, its cultural contribution, its cultural hubs, and its cultural practitioners. Each amination programme must score 18 out of 35 points to pass the test.

In addition to completing an application form for each film, a Statutory Declaration to certify the truth of the particulars in the application is also required.

The Statutory Declaration can be made before a practising solicitor, a general notary, a Justice of the Peace, or any other officer authorised by law to administer a statutory declaration under the Statutory Declaration Act 1835.

Other supporting documents are also required for the BFI to assess the application. These are shooting scripts, synopsis of the screenplay, shooting schedule, production budget/final cost report, chain of title (if applicable), a copy of the film if complete, and an Accountant's Report in certain circumstances.

An Accountant's report is required if an application for a final certificate relies upon points in Section C and/or Section D of the cultural test. The Accountant's Report must be prepared by a person eligible for appointment as a company auditor under Section 1212 of the Companies Act 2006.

Myriad Associates employs BFI application specialists who can help you pass this test. Contact us for advice. 

The Accountant's Report is required when an application claims points in Section C and/or Section D.

The Accountant's Report aims to verify the total and UK expenditure of the work in Section C and the nationality or residence of all persons in Section D.

The Accountant's Report must be prepared by a person eligible for appointment as a company auditor under section 1212 of the Companies Act 2006.

An Accountant's Report can cost between £500 and £2,000 per application, depending on the film's costs and the number of applications you submit.

The BFI cultural test regulations require you to make a statutory declaration which states that the information you’ve given in your application is accurate.

A statutory declaration is required for both the Interim and Final certifications.

The statutory declaration must be made before a practising solicitor, general notary, Justice of the Peace or an officer authorised by law to administer a statutory declaration under the Statutory Declaration Act 1835.

Non-core film expenditure relates to initial script viability activities or commercial exploitation of the film.

So, core expenditure excludes any expenditure incurred on development, distribution or other non-production activities.

Ineligible expenditures include entertaining, publicity, promotion, audit fees, interest, completion bonds and other forms of insurance.

The amount of Film Tax Relief (FTR) to which a Film Production Company (FPC) is entitled in respect of a film production trade is determined by the amount of core expenditure related to activity undertaken in the UK.

Where a film is partly produced in the UK and partly outside of the UK, it will follow that some goods and services may be non-UK. In such cases, it will be necessary to apportion the relevant core expenditure between UK and non-UK expenditure.

This applies to goods and services provided throughout core expenditure stages. It applies to expenditures incurred during pre-production, principal photography and post-production.

The apportionment method is not fixed and can be determined on a case-by-case basis. The key criterion is that it must be done on a fair and reasonable basis.

There will often be more than one ‘fair and reasonable’ basis. The requirement is not that the apportionment must be made using the fairest and most reasonable basis but simply that it must be made on a fair and reasonable basis.