Capital allowances can help you save money when you purchase assets to use in your film business – and right now, a temporary super-deduction is available to take advantage of – but you need to act fast.
The deadline to use this super deduction is 31st of March 2023.
Read on for further details.
What are capital allowances?
Capital allowances are tax reliefs for businesses that allow you to deduct some or all of the value of an item from your profits before you pay tax.
In the film industry, this normally comes as production expenditure. This includes the cost of producing a film, such as salaries, equipment, sets, and post-production expenses. The entire cost can be claimed as a capital allowance in the year it was incurred.
You can also claim capital allowances on ‘plant and machinery’, which is another common cost within the film industry, including:
- items, machinery and equipment you keep to use in your business
- parts of a building that are integral to it, such as lifts and electrical systems
- some fixtures, such as fitted kitchens, bathroom suites and CCTV systems (known as ‘integral features’)
- commercial vehicles
- costs of demolishing plant and machinery.
If you’ve incurred qualifying capital expenditure on the construction, fitting, refurbishments or acquisition within a trade as part of your film business, that’s a capital allowance.
You must also own the asset you’re claiming. As a result, you cannot claim capital allowances on hired or leased assets, but you can still claim tax relief on rental costs.
So, you’d have to buy that new camera rather than lease it out to get the benefit.
When you buy something from a previous business owner, you can only claim for integral features and parts that they themselves claimed for.
Types of capital allowances for plant and machinery
With capital expenditure, you can claim different amounts depending on your specific capital allowance.
The capital allowances include:
- annual investment allowance – allows you to claim up to £1 million on certain plant and machinery; the main capital allowance
- 100% first-year allowances – lets you claim the full amount for new and unused plant and machinery, mostly related to energy, in the year it was purchased
- writing down allowances – you can claim these if your plant and machinery do not qualify for the annual investment allowance or if you’ve already claimed the maximum amount.
What other areas can I claim for my film business?
Research and development: This includes the cost of developing new technologies or techniques in the film’s production.
These expenses can be claimed as a capital allowance at a rate of 100% in the year they were incurred.
Intangible assets: This includes the cost of acquiring the rights to use intellectual property, such as copyrights or trademarks, in producing a film.
These assets can be claimed as a capital allowance over a longer period of time.
The temporary super deduction deadline is ending soon
There are two more capital allowances, which end very soon, on 1 April 2023.
Both of these measures were introduced by then-Chancellor Rishi Sunak in the Spring 2021 Budget to boost investment during the Covid-19 pandemic.
The first is the super-deduction, which allows companies to reduce their taxable profits by 130% of the cost of qualifying brand new plant and machinery before tax.
This allowance is only available to limited companies and only on brand-new items of plant and machinery. The super-deduction is not available on nearly new or used items of equipment.
The second is the 50% special rate first-year allowance, which lets companies deduct 50% of their cost from their profits before tax.
The Government has a special tool you can use to check a claim on one of these two allowances and how much relief you may be entitled to.
This is the last chance to claim these allowances, so act quickly to make the most of them.
Get in touch to talk about capital allowances for the film industry