UK government confirms additional boosts to UK film industry
The UK’s Chancellor of the Exchequer, George Osborne, has confirmed changes to film tax relief announced in the autumn.
Osborne, who announced the annual budget in Parliament today, said: “We’re supporting our creative industries… The European Commission has today approved the extension of our film tax credit.”
The move will see an increased rate of relief for larger budget films. The rate of tax relief for films with a qualifying expenditure in excess of £20m ($33.2m) will be raised. From April, all films will receive 25% of the first £20m of qualifying UK expenditure, with any excess qualifying UK expenditure still receiving a 20% tax credit.
This means that producers of larger budget films will receive an increase of 5% on the first £20m - namely, an additional £1m of tax relief.
The existing 25% tax relief on lower budget films and on high end TV and non-film animation productions remains unchanged.
In addition, the minimum UK expenditure requirement will also be reduced from 25% to 10%. This will help independent production companies by encouraging minority co-productions on which the UK spend is less than 25%.
The Cultural Test for the film tax relief will be modernised to align it with incentives in other member states and to support visual effects and wider film production.
The publication of the new Test is expected after the Finance Bill 2014 receives Royal Assent in the summer, but it is understand that the key changes will be based on the form published as part of the consultation process.
Films will need to score 18 out of 35 available points (not 16 out of 31, as under the current Test).
In terms of cultural content, the points available (for the setting of the film, its lead characters, its subject matter/underlying material and its language) will relate to the European Economic Area (EEA) not the UK; and 6 points will be available if the original dialogue is a language of the EEA (instead of 4 points for being in English).
A total of 4 (not 2) points will be available based on the location of principal photography, special and visual effects. Points will be awarded for principal photography/SFX if 50% or more takes place in the UK and for visual effects if 50% or more takes place in the UK. Subject to a maximum score of 4 points, an additional 2 points will be awarded if 80% or more of either PP/SFX or VFX takes place in the UK.
The changes will be of particular benefit to the UK post-production/VFX sector, where the increased financial incentive for larger budget films, the reduced minimum UK expenditure level and the expected amendments to the Cultural Test are likely to mean an increased number of films being attracted to the UK to utilise its VFX houses, thereby addressing the current loss of such work to overseas suppliers.
Iain Smith, British Film Commission Chairman and film and television producer, said of today’s announcement: “The British film industry continues to demonstrate its value both in terms of job creation, international investment and creative and technical expertise, as demonstrated by British successes as this year’s Academy Awards and BAFTAs.
“We are delighted by this further recognition of the value of the creative industries to the British Government.”
Adrian Wootton, CEO of the British Film Commission and Film London, added: “These changes will make the UK’s world-class production industries even more attractive and accessible to international and British filmmakers and further build on and expand the UK’s business prospects.
“Importantly it will allow the UK’s world-class VFX and post production sectors to remain competitive and the BFC will be hosting a group of senior US executives next month to capitalise on the new opportunities.
“It’s also important to note the hugely positive impact of the tax relief changes on the UK’s international co-production prospects, opening up opportunities with a wide range of international territories.”
The first two changes will be made through the Finance Bill 2014, which is likely to receive Royal Assent towards the end of July. Changes to the cultural test will be made through secondary legislation, laid after Royal Assent and likely to be in force in the Autumn. Claims for tax relief can then be submitted to HMRC, and backdated to 1 April.
In anticipation of today’s announcement, the BFC is hosting a number of events to promote the enhanced tax relief, the first of which take place in Los Angeles next week.