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Film tax regime

The 2006 Finance Act included new legislation to provide a comprehensive tax regime for companies involved in film production.

The regime included a special tax credit incentive and enhanced loss deduction for films intended for theatrical release. At the same time rules were introduced for all film production companies to:

• require separate computations for each film (or linked series of films);
• delay deductibility of losses until films are completed or abandoned;
• recognise income in proportion to expenditure incurred (rather than in line with GAAP).

The TV industry in particular was affected by the additional compliance obligations without being able to benefit from the tax credits and enhanced deductions. As a result of lobbying from the industry the Government has announced a relaxation which enables companies to opt permanently out of the new regime.