Film Tax Rebates: Recognition of expenditure and unpaid amounts

There has been some confusion about the eligibility of unpaid amounts for Film Tax Credits. The relevant legislation for the treatment of unpaid amounts is in section 1179 DT of the Corporation Tax Act 2009. Costs which remain unpaid four... Read more

There has been some confusion about the eligibility of unpaid amounts for Film Tax Credits. The relevant legislation for the treatment of unpaid amounts is in section 1179 DT of the Corporation Tax Act 2009.

Costs which remain unpaid four months after the end of the accounting period in which they are incurred are excluded expenditure. This means they do NOT count towards the tax credit. This is the case even if there is an unconditional obligation for the costs to be paid in the future, or even if the company plans to pay them within the four month window but fails to do so.

It should be noted that when a claim is made for the tax credit, only paid amounts at the point in time are eligible for the rebate. If a claim is made four months after the accounting period, all amounts paid up to that point can be included in the rebate claim. But if a claim is made (for example) one month after the accounting period only those amounts that have been paid at that point can be included in the tax rebate claim: amounts paid in the following three months will be excluded. An amended claim can however be made for amounts paid within four months of the accounting period that were not included in the initial claim

Qualifying expenditure includes costs for:

• pre-production
• principal photography
• post-production

Core expenditure excludes any expenditure incurred in development, distribution and non-production activities

The rules regarding unpaid amounts need close scrutiny when productions take a loan out against the tax rebate.

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