Tax Credit - United Kingdom

http://www.ukfilmcouncil.org.uk/
The aid takes the form of an enhanced tax deduction and a payable
film tax credit. The enhanced tax deduction allows a film production company to
benefit from a higher deduction for certain production costs than the normal UK tax
rules would allow. The payable film tax credit allows the film production company to
receive a cash payment of up to 25% of any tax loss (after applying the enhanced tax
deduction). The costs which qualify for the aid are the pre-production, principal
photography and post-production expenditure by the beneficiary on goods or services
that are used or consumed in the UK (“qualifying UK costs”).
The details of the two components of the aid are as follows:
(a) The enhanced tax deduction allows up to 80% of the total qualifying UK
costs (which can be deducted in full under the normal UK tax rules) to be
deducted again from the taxable profits of the beneficiary at the following
rates: 100% in the case of a film whose pre-production, principal photography
and post-production expenditure is £20 million or less; 80% in the case of films
with a higher production budget. The film production company can set this
additional deduction against income from the film in question, reducing its UK
tax liability for income generated by the film.
(b) The payable film tax credit allows a film production company to claim a cash
payment for any tax loss (after applying the enhanced tax deduction) up to the
80% limit on the qualifying UK costs mentioned above. The UK Government
pays the film production company a cash payment of 25% of the losses in the
case of a film whose total pre-production, principal photography and post-
production expenditure is £20m or less; and 20% in the case of films with a
higher production budget. These losses can no longer be set against income or
relieved in any other way.
The way that the 80% limit on the qualifying UK costs is applied (see paragraph (18))
means that neither the enhanced tax deduction nor the payable film tax credit can be
claimed on the remaining 20% of the qualifying UK costs incurred by the beneficiary
or on other costs related to making the film. Therefore, any expenditure above 80%
(and any non-UK expenditure on the film incurred by the beneficiary) is dealt with
under the UK’s normal tax rules.
Remember to exclude the tax credit from your film budget.
Check QuickFilmBudget.com for a sample film budget!