Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN11 Film Tax Regime: Excluding non-cinema production

Who is likely to be affected?

1   Companies incurring expenditure on the production of films other than for the cinema (for example, television productions).

General description of the measure

2   Finance Act 2006 (FA 2006) introduced new tax rules for the production of films by companies. Legislation will be introduced in Finance Bill 2007 to allow companies to opt out of these rules and into general tax treatment. A company will be able to make an election that it is not a film production company in respect of any future films and of all films that started principal photography in the previous two years.

Operative date

3   The measure will allow elections to be made on or after the date that Finance Bill 2007 receives Royal Assent.

Current law and proposed revisions

4   FA 2006 sets out rules for the taxation of companies making films both for the cinema and for other media (such as television). It sets out a set of basic tax rules for films in Schedule 4 to the Act, treating each "film" as a separate trade, and brings into account the costs and income of the film. Schedule 5 then provides additional tax relief (film tax relief) to production companies making British cinema films

5   The new rules enable companies (including those not making films for the cinema and therefore not entitled to the additional Schedule 5 relief) to elect not to be within the FA 2006 rules, but to be taxed instead according to general tax rules. A company will be able to do this by making an election in its tax return. Once made, such an election will apply to films starting principal photography in the period to which the return relates, as well as any later films. It will not be possible to reverse an election after the time limit for amending the return has passed.

Further advice

6   If you have any questions about this change, please contact David Harris 020 7147 2562 (email: Information about Budget measures is available on the HM Revenue & Customs website at