VAT Planning for Film and TV Production Businesses

The UK’s film and TV industry is thriving, making it crucial for production businesses to understand VAT planning. Value Added Tax (VAT) affects their registration, tracking, filing, and payment processes. We will discuss key aspects of VAT planning for film and TV production businesses. This includes registration thresholds, filing options, VAT schemes, rates, returns, and the treatment of VAT on expenses. Understanding these topics helps businesses comply with HMRC regulations.

VAT Registration

Companies or self-employed individuals must register with HMRC for VAT when their business turnover exceeds or is expected to exceed the specified threshold in a financial year. You can find the current registration thresholds on the HMRC website. However, businesses can also make a voluntary election to register for VAT, even if their turnover is below the threshold or if they have dealings with other EU countries that require registration. The registration process can be completed online, and upon successful registration, HMRC provides a unique reference number required for filing VAT online.

VAT Filing and Payment

Once companies and individuals register for VAT, they account for VAT quarterly, although they can choose to file monthly VAT returns if preferred. This option benefits productions with minimal output VAT by allowing earlier VAT reclaims and improving cash flow. Businesses must file VAT returns on time and make payments before the deadline to avoid fines. HMRC provides several payment options, including direct debit, online payment, and bank payment.

VAT Schemes

In addition to standard VAT accounting, HMRC offers several VAT schemes that may be beneficial for film and TV production businesses. These schemes provide alternative methods of accounting for VAT and can help simplify the VAT process.

Cash Accounting Scheme

Businesses can account for VAT only on items that they have paid, thanks to the cash accounting scheme. This scheme is an alternative to the accruals basis, which accounts for VAT on invoices dated in the relevant quarter, whether they are paid or not. Businesses must consistently apply the chosen accounting basis each quarter.

Flat Rate Scheme

The flat rate scheme is available for businesses with turnover below a certain level (currently £150,000 as of March 2020). Under this scheme, businesses still charge VAT on sales invoices at the usual rate but pay HMRC a reduced fixed percentage of the VAT charged. However, businesses using the flat rate scheme cannot claim input VAT, as the reduced VAT paid covers potential input VAT.

Annual Scheme

The annual accounting scheme allows businesses to make equal quarterly or nine monthly payments of VAT on account throughout the year. These payments are based on the VAT paid in the previous year. At the end of the year, businesses only need to complete one VAT return. If they have overpaid, they can claim a refund from HMRC, and if they have underpaid, they make a balancing payment.

VAT Rates

The standard rate charges most UK VAT, but there are exceptions. Some items are zero-rated, meaning they are subject to VAT, but the applicable rate is zero percent. Additionally, certain items are exempt from VAT, such as insurance and interest charges. It is crucial for film and TV production businesses to understand the VAT rates applicable to their activities to ensure accurate VAT accounting.

VAT Returns

When filing a VAT return, HMRC focuses on the numbers in boxes 1 and 4, which represent output VAT and input VAT, respectively. Companies should keep separate nominal accounts for output VAT and input VAT and reconcile the nominal ledger VAT accounts with the net VAT payable on the VAT return. Companies must investigate and resolve any discrepancies before submitting the VAT return.

Making Tax Digital

HMRC’s rules for Making Tax Digital for VAT require VAT registered businesses with a turnover above the VAT registration limit to follow them from April 2019. This initiative aims to digitise VAT records and requires businesses to submit their VAT returns using compatible software. Before making VAT returns, businesses need to authorise their software for this purpose.

VAT for TV Production in the UK

VAT for TV production in the UK is a key part of financial planning for broadcasters, production houses, and post-production firms. Television projects often involve multiple suppliers, freelancers, and international transactions, which makes VAT treatment complex.

Key VAT Rules for TV Production

• Most UK TV production services are standard-rated at 20% VAT.

• Pre-production, filming, editing, and post-production costs are generally eligible for input VAT recovery, provided the company is VAT-registered.

• Exports of programming to non-UK broadcasters may qualify as zero-rated supplies, depending on where the customer is based and the place of supply rules.

• Co-productions involving overseas partners require careful VAT apportionment and contract-based review to determine liability.

Common Challenges

Production companies often face difficulties in recovering input VAT on mixed-use costs (for example, staff time shared between taxable and exempt supplies). Partial exemption methods and correct VAT coding are essential to maintain compliance.

Apex Accountants’ VAT Support for TV Producers

At Apex Accountants, we assist television producers with VAT registration, return preparation, and identifying reclaim opportunities on production costs. Our experts help apply the correct VAT rates, manage cross-border transactions, and prepare for HMRC queries or audits.

Strong VAT compliance in TV production not only reduces risks but also supports cash-flow stability, especially for long-running or commissioned series.

VAT for Movie Production in the UK

VAT for movie production in the UK plays a vital role in controlling budgets and maintaining compliance with HMRC’s strict digital record-keeping requirements. Film projects involve numerous suppliers, international spending, and rebates, all of which must be managed within the UK VAT framework.

Core VAT Considerations for Film Producers

• UK film production services are typically standard-rated at 20%, though some exports can qualify for zero-rating.

• Expenses incurred overseas may be eligible for recovery through the 13th Directive VAT refund scheme.

• Producers claiming Film Tax Relief (FTR) must keep VAT treatment consistent with cost allocations reported to HMRC.

• VAT grouping can simplify accounting for studios with multiple entities or subsidiaries.

Industry-Specific Complexities

Film production often includes grant income or investor funding, which can affect VAT recoverability. Additionally, imported equipment, crew accommodation, and location hire require correct reverse-charge and input VAT treatment.

How Apex Accountants Support Film Producers

Apex Accountants help UK and international film producers maintain full VAT compliance from pre-production through post-release stages. We advise on reclaiming input VAT, managing VAT on co-production deals, and preparing digital VAT submissions under Making Tax Digital (MTD).

With proper VAT planning, movie producers can prevent costly errors, safeguard rebates, and keep projects HMRC-ready at every stage.

VAT on Filming and Location Agreements

Traditionally, treating access to land or property for filming as a right over land did not involve charging VAT unless additional services provided were ancillary or apportionment was necessary. However, following the ruling in the Harewood Estate case, estates and country houses used for filming should now typically charge VAT for film income. Location agreements may vary in terms of services provided, such as electricity, toilets, parking, and accommodation. Even if owners have existing HMRC rulings stating that film income is exempt, these exemptions can be overturned. Therefore, it is advisable for owners to charge VAT where commercially achievable, as collecting VAT after the event can be challenging.

Treatment of VAT on Expenses

The treatment of VAT on expenses is an important consideration for film and TV production businesses. The production can reclaim VAT on disbursements, which are items where ownership transfers to the production. However, the production can only reclaim VAT on personal expenses if employees or non-VAT registered freelancers incur them, and the production keeps the original receipts. VAT registered freelancers must invoice for the net amount, with VAT charged on top, for the production to reclaim the VAT. Fuel receipts follow specific rules, such as fuel scale charge rules, when claiming VAT. These guidelines also apply to actors, extras, and other casual workers engaged in film, TV, or similar productions.

Conclusion

VAT planning is a crucial aspect of financial management for film and TV production businesses in the UK.

Please feel free to Book a free consultation with us today to plan your VAT affairs efficiently.