The UK is introducing tax credits for television production, high-end animation and video games this month. Michael Rosser explores how the relief could further strengthen a TV powerhouse
The UK has long generated a raft of high-quality television and boasts some of the world’s top production talent. But in recent years that raft has sprung a leak.
Large-scale local productions such as Birdsong, Titanic and Parade’s End have opted to shoot in territories that offer financial incentives such as Belgium and Hungary in order to be commercially viable. Others had to be abandoned altogether in the face of untenable economics.
Meanwhile, lucrative US series avoided the UK, with networks considering it a location of last resort.
‘The UK was missing out on a real opportunity to build its national and regional infrastructure’
Charles Moore, Wiggin
The prospect of a UK TV tax credit - a mechanism, like the UK’s film tax credit, that would attract investors and draw ambitious, high-budget foreign productions - became a thing of fantasy for local producers. So it is perhaps fitting that it was a fantasy series that inspired a new tax relief for high-end TV production that will come into effect in April alongside tax credits for animation and video games.
“The amazing impact Game Of Thrones made on the economy in Northern Ireland opened our eyes to a market failure in the UK,” says Charles Moore, partner at media law firm Wiggin.
The first three seasons of the HBO fantasy drama, which received funding from Northern Ireland Screen supported by Invest NI, have generated around $100m for the local economy to date.
“It highlighted that as a result of US shows not coming to the UK and British producers heading offshore to make high-end drama, the UK was missing out on a real opportunity to build its national and regional infrastructure, and to become a key international hub in the rapidly expanding TV economy,” says Moore.
In 2012, Moore helped form the TV Coalition, made up of some of the biggest names in UK production, alongside Stephen Bristow, then director of media, TV and film at accountant RSM Tenon, and Andy Weltman, then EVP of US production at the British Film Commission.
Research by Wiggin and RSM was submitted to the government in January 2012. It put forward the case for a UK tax credit for TV productions with a budget of at least $1.5m (£1m) per hour, structured along similar lines to the existing, successful film tax relief.
The research stated that at least $523.7m (£350m) of additional UK production spend could be generated annually, boosting the economy by around $1.5bn (£1bn) per year.
“We received a very positive response quite quickly,” recalls Moore. “What we thought might be a tough argument in the midst of a recession was not tough at all because we were able to demonstrate the real and almost immediate impact that a TV tax credit would have on the UK’s creative industry.”
Just a couple of months later, in March 2012, the Chancellor’s Budget announcement confirmed the new tax incentive. TV dramas, comedies and documentaries with a budget of more than $1.5m (£1m) an hour would be eligible to receive tax breaks from April.
Qualifying projects will be able to secure a tax rebate of up to 20% of their production budget, if produced in the UK. As with film, there is no quota on the number of TV projects that can access the relief in a year.
UK production companies are already gearing up for the change. Ivan Mactaggart, producer at the UK’s Trademark Films, says: “When we co-produced Parade’s End we had to spend as much of the budget in Belgium as possible to maximise the tax benefits there. We much prefer shooting in the UK and the tax credit will make a big difference.”
‘We much prefer shooting in the UK and the tax credit will make a big difference’
Ivan Mactaggart, Trademark Films
Mactaggart reveals that the US is already showing an interest. “We have already been approached by US companies with shows they want to shoot here but our key focus remains getting home-grown shows off the ground,” he adds. “Importing production is great but we don’t want to export profits.”
Ruby Film and Television’s Faye Ward, who co-produced feature Jane Eyre and produced BBC drama Toast, says productions that were set to be made overseas now have a better chance of being made in the UK.
“The tax credit will give us a chance at competing with the US, putting the money on screen with bigger, bolder ideas,” says Ward, adding there has been “significant dialogue” with US companies wanting to co-produce in the UK.
The UK gears up
Andrew Smith, director of strategy and communications at Pinewood Studios, acknowledges that an influx of productions to the UK will present “challenges - but good challenges”.
“We are making a $299.1m (£200m) investment to build another 12 stages, covering 100,000 square metres - subject to planning permission,” says Smith.
“No one wants to compromise the UK’s offering. There will be a high level of demand on skills and infrastructure, but there are plans in place to address that. The industry is investing.”
The British Film Institute (BFI) has been appointed by the UK government as the certification unit for the tax reliefs.
The BFI, which has administered the certification process for film since 2007, will be the first point of contact for applicants wanting to qualify their project as eligible under co-production agreements and the UK’s cultural test, which will be similar in design to the cultural test applied to films.
The British Film Commission (BFC) has been charged with promoting the TV tax relief.
Outlining the plans ahead, Adrian Wootton, chief executive of the BFC and Film London, says: “The BFC will host a series of activities and events on both sides of the Atlantic, and at relevant international festivals and markets promoting the tax relief to both established and emerging territories.
“To coincide with the anticipated launch of the new TV relief in April, there will be events in London and around the UK to outline how the tax relief will work and the opportunities available, aiming to galvanise the industry to take advantage of the potential influx of new business.
“We will be meeting with producers and executives in LA and New York to inform them of the financial benefits of the tax relief, how it will work and what they can achieve in the UK.”
Animation in the UK is also set to benefit from new tax reliefs, although its journey has taken longer to complete.
Oli Hyatt, co-founder and head of development at animation production company Blue Zoo, first started to campaign four years ago.
“We had been pitching for jobs but were getting turned down,” recalls Hyatt. “Asked why, we were told we offered a better creative at a reasonable cost but tax breaks elsewhere meant they had to go with a cheaper option. The system wasn’t working.”
Aardman Animations, the producer behind the award-winning Wallace & Gromit franchise, had previously voiced concern that animation production would have to be taken overseas to make it commercially viable. But the company is now more positive about production remaining in the UK.
Sean Clarke, head of Aardman Rights, says: “Hopefully these tax reliefs will create a platform to encourage more investment in the UK and have a positive impact on the industry, with the creation of more jobs and a revitalised interest in developing a career in the animation sector.
“In a world of diminishing TV and DVD revenues, there is an increased reliance on ancillaries to complete financing and make productions profitable. A tax break in the UK will go some way to help close this gap.”
At a glance: the UK tax relief for television production, animation and video games
The tax relief applies only to production expenditure on pre-production, principal photography and post-production of high-end TV and animation. The TV programme, animation or video game must satisfy a cultural test, scoring at least 16 out of a possible 31 points. The firm seeking relief must be a UK-incorporated company and directly involved in the production of TV programmes or video games. Co-productions will be eligible. At least 25% of core expenditure must relate to goods or services used in the UK.
The programme must be a drama, comedy or documentary. Other genres such as current affairs and entertainment programming are excluded. Direct production costs must equate to at least $1.5m (£1m) per hour and the programme must be intended for broadcast.
The programme must be animated but it can include mixed content, ie, live action with animation. To qualify for the relief, only 51% of mixed-content programmes’ production costs need to be spent on animation. The payable tax credit will be 25% of qualifying expenditure, subject to a cap of 80% of such expenditure (giving an effective rebate of 20% of relevant spend).
Games made for the primary purpose of advertising or gambling are excluded. However, games with some product placement or in-game ads will be eligible.