CREC021000 - Qualifying productions: films
For a film to qualify for an expenditure credit, it must meet the legislative definition of a 鈥榝ilm,鈥� and also听the three qualifying criteria outlined in section 1179DB of the Corporation Tax Act (CTA) 2009.听
Animated films receive a higher rate of credit than live-action films 鈥� see CREC061300.
Meaning of 鈥榝ilm鈥�听
Section 1179DA听CTA听2009 states:听
鈥淔ilm鈥� includes any record, however made, of a sequence of visual images that is capable of being used as a means of showing that sequence as a moving picture.听
鈥楩ilm鈥� includes the film鈥檚 soundtrack.听
A series of films is听treated as a single film for the purposes of the Audio-Visual Expenditure Credit (AVEC), unless the series:听
has more than 26 parts听
has a running time of over 26 hours听
is not a self-contained work or series of documentaries on a common theme
Animated films 鈥� section 1179EA CTA 2009听
A film is an animation if (and only if):听
the imagery of the completed film includes animation, and听
the core expenditure on the completed animation constitutes at least听51% of the total core expenditure on the completed film
The 51% test takes all core expenditure into account, both UK expenditure and non-UK expenditure.听
Please see CREC024000 for details of what counts as animation costs听and how to treat mixed animations.
听
Qualifying criteria听鈥� section 1179DB CTA 2009听
A film is a qualifying film for AVEC if it meets the following criteria:听
it is听intended for theatrical release听
it is certified as British (see CREC028000)听
at least 10% of core expenditure on the film is UK expenditure (see CREC029000)听
Meaning of 鈥榯heatrical release鈥�听鈥� section 1179DC CTA 2009听
鈥楾heatrical release鈥� means exhibition to the paying public at the commercial cinema.听
It must听be听intended听that听a significant proportion听of the earnings from the film will be obtained by听such exhibition. The phrase 鈥榮ignificant proportion鈥�听is not defined听in legislation, but听HMRC accepts听that 5% of total estimated income is a significant proportion听of听the earnings of a film.听
The fact that a film is certified as British does not affect whether it is intended for theatrical release. The British Film Institute, on behalf of the Department for Culture, Media听and Sport,听can certify films that are not so intended.听
A film may meet the theatrical release condition even if the intention is to gain a significant proportion听of the earnings from theatrical release abroad, rather than in the UK (although a British film would normally be expected to be intended for UK theatrical release).
Intention听
The legislation does not specify whose 鈥榠ntention鈥� this should be,听but at any time听there will normally be someone entitled to determine听how the film is to be exploited. This would generally be听the person who commissioned it听鈥�听if a company, the directors of that company听鈥� but there may be cases where someone else has a prior claim.听
It is not necessary for the film to actually be released for showing to the public at the commercial cinema to meet the intention听condition.听However, if it was not eventually released, the question arises of whether it was ever so intended (and,听if so, when听the intention changed).听
If there is any doubt about the intention, the following factors would count in favour听of the film being intended for theatrical release:听
a finance plan written on the basis that the film will be released theatrically听
a film which is a normal full-length or short feature film of a type commonly shown at cinemas听
production in a format suitable for theatrical showing at the commercial cinema听
payment to actors and other participants on terms in line with those prevailing for cinema films (rather than, for example, television work)听
the听relevant person can demonstrate, at the end of the relevant accounting period, the intention to seek a contract to present the film in the cinema听
A factor which would count against an intention for theatrical release is where there are no commercial cinemas which show the particular type of film
Where the production is commissioned by a television company or听is clearly more suited to some distribution channel other than the cinema, the听theatrical release condition may not be met. This will be the case even if the film is shown at a cinema. For example, even where episodes of a TV soap opera or of another TV production were screened at a cinema before their transmission on television, the condition would still not be met.
Theatrical release condition not met听
A film can only be a qualifying film for AVEC for a particular accounting period if, at the end of that period, it is intended for theatrical release.听
If a film听is not intended for theatrical release听at the end of an accounting period, it cannot qualify for AVEC as a film in respect of that period or any subsequent听accounting period听(but credits given in previous听periods are not clawed back).听However, if, at the end of the period, the film is intended for broadcast instead, it may qualify for听AVEC听as a television programme听(see CREC026000).听
It may not be readily apparent听whether a feature-length production is intended for broadcast on television as a programme听or intended for theatrical release as a film. There may be more than one contingency plan for exploitation of the production. Where both conditions are met, the theatrical release condition takes precedence听and the production is treated as a film.听