Film Tax Relief

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.

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.

In most cases, your production must be certified as British by passing the British Film Institute (BFI) cultural test.

To pass the BFI cultural test, complete an online application form for each production for which you want to claim ATR. BFI will assess your application and award points based on the cultural content of the production, its cultural contribution, its cultural hubs, and its cultural practitioners.

You will need to achieve 16 of a possible 31 points to pass.

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

BFI is currently reporting 8-10 weeks to process submitted applications.

Delays may occur if application forms are not correctly completed or need further information. If you need the certificate by a specific date, make sure you apply in good time and specify your deadline date on the application.

A Letter of Comfort: If you’re not yet ready to complete a cultural test application, you can submit a draft application and receive a Letter of Comfort from the BFI. This letter will state that the production should pass the cultural test. A Letter of Comfort can’t be used to submit an ATR claim to HMRC, but it is reassuring to have and can help you secure financing.

An Interim Certificate: You can apply for an Interim Certificate if your production is not yet finished. An Interim Certificate will be issued once the BFI and the Department of Culture, Media and Sport (DCMS) are satisfied that your production will pass the cultural test based on the proposals set out in your application.

A Final Certificate: A final certificate proving your production is British will only be issued after it is finished and ready for release. Therefore, applications for a final certificate should not be submitted before the production has been completed. 

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.

A report can cost between £500 and £2,000 per application, depending on the production 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.

Each production must be treated as a separate trade for tax purposes, so you’ll need to create a profit and loss account for each production to report to HMRC. A company makes this election in its tax return by accounting for the production as a separate trade in its Corporation Tax computations.

There are four phases of development in a production:

• Development
• Pre-production
• Principal photography
• Post-production

Activity between development and commercialisation are (largely) eligible core costs.

The key to when core costs can be claimed is knowing when the project was “green-lit”. Development activity is usually undertaken to determine whether the production is commercially feasible. Any expenditure in this stage is speculative in nature. 

Expenditure can be claimed once it is clear that the production will go ahead. Some production companies may have done very little conceptual development before production, and some may have spent more time assessing its commercial viability.

Commercialisation activities are no longer eligible, even though they may be crucial to a production's success; they are activities following when a production could be released to the public.

Non-core expenditure relates to initial design stage activities or commercial exploitation of the production.

For example, initial concept artwork used as part of the process of establishing commercial viability is not a core expenditure and is not eligible for FTR. Marketing a film isn’t classed as a development expenditure and, therefore, is not a core expenditure.

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

The amount of FTR to which a production company is entitled 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.

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.

Contact the FTR team today.