John McVay

Source: Screen File

John McVay

Producers alliance Pact has played a key role in lobbying for the UK Independent Film Tax Credit (IFTC) that was announced in the budget yesterday by chancellor Jeremy Hunt.

Pact CEO John McVay tells Screen how the IFTC, which offers an effective 40% tax relief for UK-qualifying films costing up to £15m, was secured and how it will work in practice.

What is your reaction to the news today about the UK Independent Film Tax Credit?

I’m absolutely delighted. This is a journey we started in 2017. We proposed then a 40% tax credit for films within a certain budget range. We got quite far with the Treasury and HMRC, but it got closed down because [the UK] had not yet exited the EU. [The government] was worried about an EU state aid investigation. It’s when the UK was actively negotiating our settlement agreement with the EU. People were worried that if we managed to get an enhancement for film, that would have upset the French industry, and then they would pushed for an EU investigation.

Obviously, state aid was a big issue in the settlement agreement. It got killed then basically. We got up the hill, but we couldn’t get to the altar.

How did it all restart?

When [the EU exit] settled down, and with Ben Roberts coming into BFI [as CEO] and a change of attitude there, we just put the pressure on. [We said] “Look Ben, your single biggest problem isn’t inward investment or celebrating inward investment, your biggest problem is your indigenous film industry.” In 2022, [the BFI] published a report on the economics of independent films which was really helpful.

And then last October, we commissioned two major consultancies to put together a case for intervention to get a tax credit of 40%. I’ve been working on that since then. We didn’t publish it, but used it to get everyone lined up and on side including all the Americans who wrote in support. It’s a credit both to them and this industry that we were able to convince not only the secretary of state but also the prime minister that this was an intervention that was needed right now.

Did the prime minister Rishi Sunak get personally involved?

Yes. We had a big round table with the prime minister. We did all the work with the Treasury. We did all the work with the prime minister’s team and [culture secretary] Lucy Frazer’s team. That resulted a few weeks ago with a private roundtable with the prime minister where we had very serious people from the [film] industry basically saying, “This is an existential problem, right now. You have to do something.”

Why was it such an existential problem for the industry?

I did a quick survey two weeks ago for the Treasury. It showed that out of over 40 films that were slated to go into production from good independent feature film companies this year, only six of them were going to be made in the UK.

They were all going to shoot somewhere else?

The lion’s share was going to Italy because they’ve got a 40% credit and a good workforce. All of the films were co-productions. They weren’t editorially anything to do with Italy, it’s just that they could afford to make them in Italy. Hopefully, this will stop that trend and bring those British stories back to Britain, getting workers here back to working on British films. Last year during the SAG strike, if we’d had a viable domestic film industry, a lot of those people who could have worked on American movies and dramas might have had somewhere else to get a job. But they didn’t because we didn’t have any work for them.

It’s called the Independent Film Tax Credit. But will studios and streamers be able to access it?

We want Americans to invest in British stories. If they want to make a film under £15m, and it’s a British producer working with them on a British story, and they want to finance it, why not – let’s get their dollars! Or if they want to make a film here that qualifies, great. We don’t have a problem with that. That’s people having employment. We want to maintain a brilliant creative workforce here. Obviously, the main beneficiaries are going to be British indie films, because we don’t make £250m films. So it’s very targeted – the major benefit will be for British independent film. But if Netflix wants to make the new Inbetweeners in the UK, that’s great.

If they give it a theatrical release… A film has to have a theatrical release to access this new credit. Do you have any sense of what that means – like how many screens or how long the theatrical window has to be?

That detail will be worked out with the BFI – that is jumping the gun a bit. Right now, the major thing is that I’ve got members who are scrambling around trying to close their finance and they’ve just got another 15% in their pocket.

That changes how you act in the market and who you might want to work with or should I say, it changes who you might be forced to work with because they’re the only ones with money. Now you might be able to turn around and go, “You know what, I’m not going to give you everything for that 5% share – because I’ve now got an extra 15% in my pocket, I’m going to do it differently.”

What kind of qualifying cultural criteria will UK films have to meet to access this?

It’s an enhancement to the current cultural test. Basically any film [can currently] get 25%. If you want to get the 40%, you will have to satisfy another cultural threshold. It will be one of three things – not all three things: so it’s either British director, or a British writer, or an official co-production. When we ran an analysis on that [qualifying criteria], we found that every British film that has been made over the past five years qualified.

They’re not significant hurdles to overcome. But they do focus it. One of our main arguments to the government was that the British independent sector is an incubator for talent that drives inward investment. Christopher Nolan, John Boyega, Edgar Wright – all of the talent that is now bringing high-budget films to the UK – started in the indie sector. If we don’t have an indie sector making films in the UK then we are destroying our R&D. Also, given that we can make films here at £10m that can actually be commercially successful, we think this will not only support talent development and incubation, but it also gives us an opportunity to make films that might stand a chance of making some money.

Will it lead to more international co-productions coming to the UK?

Maybe. Our [producers] are about to go to Cannes. If they are going there and they’re walking into the room [trying to finance a film] with 40% in their pocket rather than 25% or actually 20%, they are more attractive.

This is huge news for the industry.

This could be transformational for our independent film sector. We’ve worked hard on this. We’ve done the numbers, we did all the evidence and research, which we deployed with government and industry over the course of last summer right through to January this year, which is what led to our meeting at Number 10. The government has done a good thing here. We think this is what we need to get our production sector back up the league table and back on its feet.