ASK & DISCUSS INDEX

9 years, 6 months ago - Marlom Tander

http://www.hmrc.gov.uk/manuals/fpcmanual/FPC40020.htm

So, all you need is a business plan that assumes at least 5% of the revenue will come from the theatrical release of your short.

And the total theatrical gross for shorts last year was how much? And you can discount gate for film festivals because the revenue number that matters is the revenue to the producers, so unless the festival paid you, it's not revenue. Business plans that assume you'll change the world are what HMRC calls FRAUD.

This is NOT a tax break of any use for making shorts.

There you go, just saved you a load of ineffective paperwork :-)

9 years, 6 months ago - Paddy Robinson-Griffin

It's also worth bearing in mind that the tax break requires a limited company SPV, and the accounting overhead way out of proportion of short films.

9 years, 6 months ago - Parvez Zabier

I am an experienced production accountant, never done a short film, done features. The comments that have been made are correct.

9 years, 6 months ago - Glyn Carter

Thanks for the link Marlom. 5% is a low bar. Assume a revenue projection of £5k - only £250 has to come from cinemas.

More to the point is the need to demonstrate you're making a film that cinemas will want to show. Obviously you'd have to deal directly with a friendly arts/indie cinema, but the target is only 50 people at £5/head.

I can't see where it says the film production company (FPC) has to be an SPV, although this is common. Quote: "An FPC may therefore produce a film not intended for theatrical release. Such a film will not, though, be eligible for FTR" - which implies that another film could be eligible, and hence the FPC is not a SPV. It also says "one FPC per film", but I didn't see "one film per FPC".

Again, does anyone have experience of claiming for a short film? I'm not advocating anything, and I agree the accounting overhead may be out of proportion - but these days we all need to be more finance-savvy, so it's worth exploring.

9 years, 6 months ago - Paddy Robinson-Griffin

Hi Glyn,

You're probably right regarding specifically the SPV setup, however the mechanism is a tax credit through the limited company, so will need to show separate accounting for any project. The provisions do not artificially distinguish between 'short' and feature films...

If there is any doubt about the intention, the following factors would count in favour of the film being intended for theatrical release:
*a finance plan written on the basis that the film will be released theatrically;
*a normal full-length or short feature film of a type commonly shown at cinemas;
*production in a format suitable for theatrical showing at the commercial cinema;
*payment to actors and other participants on terms in line with those prevailing for cinema films (rather than, for example, television work), and;
*the 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.
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.

...but much of that activity would be more appropriate at feature level. The last point about 'where there are no commercial cinemas which show the particular type of film' may be a bit of a stumbling block, but if you can demonstrate a real paying audience for the film, who are prepared to cough up a fiver to see a short (ignoring the cinema hire costs), you might be able to test the legislature!

9 years, 6 months ago - Stephen Follows

I looked into this a while ago, and here's my write up (orginally published in 2010/2011) https://stephenfollows.com/uk-tax-credit-for-short-films/. I'm in the process of updating it for an article later this spring but for now here's a few extra pointers...

Since I wrote that article a lot has changed with the cultural test and some elements of the Film Tax Relief (FTR) but it's as open as ever to short films. I know of a few shorts who have successfully received money back.

The company you apply with doesn't have to be an SPV for the film, it just needs to be within the Corporation Tax net (which I believe all UK Limited companies are). In fact, if the company you apply through owes corporation tax in that year then you actually receive more money back. As in, if instead of the HMRC paying you a rebate, instead they give you a deduction on your Corporation Tax bill that year then you can claim a little more (a few percentage points I think).

It's very true to say that almost all short films don't turn a profit, although that doesn't prohibit you here. That's because *some* do, meaning that an industry professional could put together a credible business case that they expect to see a return. Four of the short films we've made for fun have turned a profit and 'Sign Language' (https://vimeo.com/9573920) made a huge percentage return.

A big caveat here will be the quality of the film and of the distribution strategy. The kinds of films which generate income are normally the top-notch ones, and/or those with famous people. If your short is poorly made and doesn't have any natural fanbase to market towards then you're on thin ice.

But, in my opinion, a very well made short film, with a well-known cast and a well researched distribution plan is more likely to make a profit that some of the micro-budget efforts currently receiving FTR.

Good luck with it!

Stephen

9 years, 6 months ago - Glyn Carter

Very interesting points throughout! Excellent article Stephen. The guidance doesn't appear to have changed substantially, although it seems clearer now. (The "5%" rule, for income from cinematic release, is now written-in by HMRC).

Whether it's worth claiming, given the time taken on paperwork, accounting costs etc, is a different matter. BBFC certification is required, so there's £200-£250 gone straight away! I guess the fact that no-one has responded saying "yeah, I did that" speaks volumes.

thanks all

9 years, 6 months ago - Jane Sanger

Glyn please email me on info@luminofilms.co.uk for a fuller answer. I have registered films at the British Council as being British for free, where does this £200 -£250 BBFC certification come from, have I missed something here? My husband is an accountant and I could possibly tell you of a way?? I am just about to try.

9 years, 6 months ago - Paddy Robinson-Griffin

BBFC is the censors office for your 15, 18 etc certificates (which you'll pretty much need for exhibition and to show that the film is intended for theatrical release.)

You can apply for DCMS Tax Credits for free, you do not need British Council certification, you just need to self-certify then spend a load of cash in the UK and include them in your tax return.

British Council are about promoting British culture offshore - your registration will maybe help with some festivals etc., but is unrelated to tax credits :-)

9 years, 6 months ago - Glyn Carter

You do need to qualify as a British film to claim FTR (on top of everything else). This is assessed by the British Film Institute, based on scoring 18 points from 35 over a range of factors. It's free, but producers need to supply:
◦Shooting script
◦Synopsis/treatment
◦Shooting Schedule
◦Production budget
◦A copy of the chain of title if using British source material as evidence
*DVD copy for final certification, final accountant's report and evidence of using UK cast/crew

For limited companies liable for tax, with a reasonably professional approach to planning and budgeting the film, all this would be covered anyway.