The measure

This measure has been introduced to correct an unintended anomaly in the film tax relief rules. It was previously announced at the 2009 Pre-Budget Report and draft legislation was published at that time.

Currently, in any accounting period after the first accounting period in which a trade was carried on, the loss surrenderable for tax credit is currently the lesser of the available qualifying expenditure (cumulative qualifying expenditure to date, less any previously surrendered amount) and the tax loss computed in that period.

Under the rules, the amount of film tax credit available to the film production company in an accounting period is affected by the proportion of UK to non-UK expenditure. In certain circumstances the timing of UK expenditure across multiple periods can serve to restrict the amount of tax credits available for the production as a whole.

This effect of the rules was not intended and they will be changed to correct this. Specifically the amount surrenderable for tax credit will become the lesser of:

• the available qualifying expenditure; and
• the loss for the period, plus any unsurrendered loss brought forward.

Who will be affected?

Film production companies making British films whose production spans two or more accounting periods and which have some non-UK expenditure.

When?

The measure will have effect for accounting periods ending on or after 9 December 2009 and will be treated for those periods as always having had effect.

The Government will legislate for this measure in the Finance Bill that will be introduced as soon as possible after the summer recess.