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PACT proposes 40% UK tax credit for British independent films

UK producers including Andy Paterson and Rebecca O’Brien back the radical proposal.

On the day that PACT-commissioned report The State Of The UK Independent Film Sector is launched, leading British producers have made a radical new proposal for the UK’s film tax credit to be hiked up to 40% for British films in the £2m to £10m budget range.

The Film Tax Relief (FTR), introduced in 2007, is acknowledged to have helped spending on UK film production to reach record levels (£1.596bn in 2016) but the plight of independent producers remains dire.

The report, put together by consultancy firm Olsberg SPI and focusing on the period between 2007 and 2017, exposes many of the chronic problems now facing the independent sector.

Prime among these is the struggle for producers to make a living yet alone build a sustainable business when (the report calculates) the international market value for UK independent films has plummeted by 50% since 2007 and continues to fall.

“Over a long period of time we were hearing that there was a structural problem in the market – that pre-sales had declined over a period of time. I thought we should get some evidence of what is actually going in the shape of the domestic market,” PACT’s chief executive John McVay commented of the reasons for commissioning the report.

The report was initiated by PACT’s film policy group. “Basically, the indigenous industry needs as much support as it can get. It keeps pedalling hard but sometimes it is pedalling backwards,” commented Rebecca O’Brien of Sixteen Films (who produced I, Daniel Blake, pictured).

Raising the Film Tax Credit to 40% is being floated by PACT members as the simplest and most efficient way to address the problem.

“We can see it is not an expensive thing to do, the mechanisms are set up,” O’Brien commented. “If you take your problems into your own hands, you’ve got more chances of getting results. With Brexit, the Government will be looking for industries to seek the answers to their own problems and innovative ways of tackling economic issues.”

Downward trend

Much of the PACT document makes stark reading. For example, 78% of respondents to the industry survey undertaken for the report have found it necessary to defer some or all of their producer’s fees since 2007.

Meanwhile, 24% of the UK’s 6,805 film production companies achieved turnover of less than £49,000 in 2015. The majority – 81.2% – saw turnover of less than £249,000 in 2015.

Some of the industry’s problems are cyclical. For example, banks withdrew from the sector in the wake of the financial crisis of 2007. Nonetheless, the conclusions that many producers are making about the report is that the crisis is a structural one. 

Independent producers dismiss the idea that they can solve their problems simply by diversifying and making high-end TV drama alongside their feature films. “If you’re trying to run a day job of doing TV and get your movies made, then the movies will never happen,” said one.

Another pointed to the Catch 22 that if you can’t get the numbers to add up, you have to make the film for less – but if you make the film for less, the numbers don’t add up.

The report was launched this morning at BAFTA’s Piccadilly Circus headquarters at an event hosted by actress Gemma Arterton.

Broken system

The Kings Speech

The Kings Speech

Speaking before the event, several producers told Screen that the funding model for independent production is broken – and that a new system is now urgently needed.

“It (financing independent production) is almost impossible at the moment because the value of the international market has fallen so much,” Andy Paterson of Sympathetic Ink commented.

“It is not even just that the numbers are low. There are so many territories that you just can’t imagine you are going to sell – so a model that we’ve used for 20-odd years really doesn’t work anymore.”

One argument the producers are making is that the independent sector is the “pump primer” and “feeder mechanism” that has enabled the UK to turn into such an attractive filmmaking destination for Hollywood. If the indies aren’t supported, the industry as a whole is bound to suffer.

Hakan Kousetta of See-Saw Films cautioned that in today’s constricted climate, it probably wouldn’t have been possible to make a film like The King’s Speech [pictured] (the runaway box-office success and Oscar winner that SeeSaw made in 2010).

“The ways that independent films are financed are not really tenable any more. The value of the international rights don’t tally with our ability to make the film at a sufficient enough budget to give that film the advantage to sell and do well.”

How do independent producers make a living currently? “Mostly, they don’t,” McVay said.

“Many, many will just make one film and won’t do another one. That is something that has plagued the sector for a long time. If you want to get your film made, often you’re going to have to sacrifice your revenues to do that - and because you’ve pre-sold your rights to everyone else, you’re not going to see anything coming back unless it (the film) goes into significant success.”

Previous initiatives

Over the last decade, PACT and others have pushed for measures to improve producers’ positions, for example The Producer Equity Corridor (“PEC”) and Producer Equity Entitlement (“PEE”), but these haven’t solved the underlying problems.

“Somehow, we have to keep on fighting in a totally undercapitalised way. That’s the problem and this is the moment to address that,” Paterson commented. “It (the 40% FTR) won’t cost anything…that new money should finally be what the tax credit was always meant to be and be the producer’s investment in the film so they actually do have an upside when the films succeed.”

Paterson added: “There is an absolute consensus across audiences, distributors, exhibitors, government that we do not want to see the British industry as we understand it die – so we have do something. It’s on a cliff edge.”

Readers' comments (8)

  • Unfortunate (?) choice of lead picture - a food bank.

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  • At long last. This is way too late and way too lame. A tax credit - what about beating the distribution/exhibition cartels which restricts distribution. What about proper payments for talent especially writer not just producers.

    What about proper development funds so people are not forced into making films from screenplays that are not ready - and so fail both at festivals and the box office (should they be so lucky to get there).

    PACT has proved yet again it is way off the curve and a totally ineffective defender of UK talent and production. It should have been making this case loudly for the last 7 years at least.

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  • Everyone struggling to make their feature under £2M can get lost?

    Level playing field please.

    Not our fault some micro budget films are cobbled together for some egomaniac directors showreel or some trustafarian with rich parents cash to throw down a grid, skewering data sets in reports like this then flooding the markets with tat.

    Some of us can make decent films under £2M and it's all on the screen. Can we have a 40% tax break too? It would have the effect of nurturing talent, taking chances on proper film makers allowing us bottom feeders who really care about our stories and craft to not have to hope and rely on getting through a small gate of public funding to close budgets and, you know, get on in life doing what we love.

    Who knows? We might have a bigger and better industry with a future instead of being an aircraft carrier for incoming US blockbusters all the time instead of living with broken hopes, repeat and rinse.

    Set us free too, please.

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  • restricting films to over £2million buddget is plain stupid, there are enought talented people that can deliver a good film for anything from a £150k budget upwards, certainly a £1m budget film can easliy be a sleeper and also a good way to start,

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  • Lady Macbeth, Under the Shadow, Gods Own Country, 45 Years, Tyrannosaur, Lilting, The Goob, 20000 Days on Earth, Notes on Blindness, Selfish Giant, Shifty, My Brother The Devil, Sightseers, Berberian Sound Studio, The Falling, I am Not A Witch.... etc, etc .... All under £2m.

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  • Precisely anonymous, although almost all those mentioned are via the Creative England scheme so that's telling right there.

    We shouldn't all have to rely on a gatekeepers doorway to find success or have that chance. The proposed 40% should enable us all to find easier routes to make budget, not some privileged few who got through a development scheme.

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  • According to the BFI, every £1 spent on film is worth 12x as much to the economy. Bonkers, as you'd expect from the BFI, but on that basis surely we need 100% tax credits...

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  • Thank you PACT for raising this and bringing to the forefront all the reasons why it is needed. This additional support would have a very positive and wide reaching affect. However, restricting this additional support to films with £2m+ budgets isn't really the way forward as can be seen by the comments above.

    We are living in a time of a 'broken system' and the UK indepdendent sector is greatly in need of more support. It also means that we don’t have to be in the 'favoured few’ of the public funding bodies, and I know so many producers who would rather make their films using this additional rebate support. Independent producers nurture, incubate and champion writers and directors and the money we raise in development predominately goes to them and others in the process of getting your film greenlit e.g budgets and casting leads. So many producers are leaving film to go into TV or other content creation as they can’t survive financially in the indie film world. As producers/production companies get paid when a film goes into production, this support could make a big difference as it creates a positive cycle where more in the industry can be sustained (not just producers) and be ploughed back into UK companies that develop films to make more films.

    This is especially relevant to the UK which currently is 'an aircraft carrier for incoming US blockbusters’ as Mike Ogden rightly points out. The UK is a talented nation and we have a very talented filmmaking community. This additional support would benefit not just the UK indie sector but the filmmaking world as a whole. And if the BFI statistic is correct, £1 spent = 12x as much to the economy, then it is clearly justifiable and affordable.

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