We have been asked to act for a film production company that has - apparently - been trading for one year.
Are there any special accounting or tax issues we need to be aware of as it's a film production company?
Any tax breaks to grab?
Or do we just carry on with accounts and tax like any other small company?
Any advice or tips much appreciated.
Replies (7)
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This is a specialist area
Film production accounting is a very specialist area and I would advise you to refer this to a specialist firm if you do not have the experience of it.
There are a lot of complications:
1. How is profit recognised?
2. How is work in progress calculated?
3. How is the production under/overspend recignised?
4. Are there any co-production agreements?
5. The accounting and record keeping has to be very detailed for production reporting (and this may need to be in a specific format depending on who is financing the production)., and also for the film tax credit, if applicable (which it probably will be). If the accounting system is not properly set up it will lead to a lot of costly time to extract the information required.
6. You need experience in claiming the film tax credit. The majority (probably nearly 100%) of the claims by accountants that have not done them before are rejected in the first instance which delays everything. I know this from HMRC staff that have praised our submissions relating to various film schemes in the past.
There are a lot more complications. I have just listed above the first few that come to mind.
agree with AS
I've kept away from these ever since I worked on one where it seemed impossible to determine whether a "loan" to the company to finance the film was actually a repayable loan or an investment with a right to profits or just straight revenue. As you can see I got confused and came to the conclusion that this is a specialist area, either to be left alone or made a speciality of. I chose the former.
I also seem to remember that you need to be a registered auditor in order to sign off the application to the Film Council for the tax credit - may or may not be an issue but worth mentioning
Royalties
One very often missed area in this is that of cross border royaltiies and CT reporting of those (if they have purchased the rights to any other footage as part of their films as documentaries often do)
Also the way in which tax relief is claimed on the films capitalised or not and how they are amortised - this is a fun area too!
Agree with others, I have had experience of film production in the past so am aware of SOME of the pitfalls but if we were asked as a smaller practice would definitely pass on to someone who had experience - risks are too great.