Improvements to Film Tax Relief

UK Screen played a significant part in driving the changes to film tax relief announced in the Chancellor’s 2013 Autumn Statement, creating the potential for an increase in inward investment feature work.

In 2013 HM Treasury launched a consultation into potential changes to the film tax relief - specifically asking for responses for the VFX sector. It became apparent at an early stage that this was an opportunity to propose changes to the existing relief that would bring benefits to the whole film industry.

Having consulted with our VFX members, UK Screen set out to engage the wider film production community on an aligned response to the HMT consultation based on an approach of harmonising the relief with other creative industries tax reliefs and widening its scope to become more 'European'.

Working with partners across the industry, including the British Film Commission, UK Screen commissioned work by Saffrey Champness to help develop a series of recommendations to government.  In addition to forming the basis of our own response, these recommendations were subsequently supported by several other industry bodies in their own submissions to Treasury.

UK Screen's recommendations, which were reflected in the Chancellor's announcement, ensure that these new measures support the whole film industry, complementing the Government’s existing support for digital content production and for skills and training in the digital content sectors.

The improvements to the film tax credit build on a cohesive package of support for the creative industries which includes the new tax reliefs for high-end television, animation and games, funding for research and development for digital content production (via the Technology Strategy Board) and the increased funding for investment in skills announced in the Spring 2013 Budget.

 

The proposed changes in detail are to:

  • Make relief available at 25% on the first £20 million of qualifying production expenditure and 20% thereafter, for small and large budget films, subject to state aid clearance. This will make the Film Tax Relief easier to use and more attractive, as well as eradicate the ‘cliff edge’ between the 20% and 25% schemes;
  • Reduce the minimum UK expenditure requirement from 25% to 10% to encourage further investment in the UK and benefit visual effects and wider industry, helping UK independent production companies by encouraging minority co-productions where the UK spend is less than 25%.
  • Modernise the cultural test – which will be expanded to allow for European as well as British Culture, in line with other creative content tax reliefs. The test will become a 35 point test with a pass mark of 18 and will include an increase in the points available for principal photography/ special effects/ visual effects and English language.

  

In January 2014 UK Screen provided further evidence to support HMT’s case for re-notification. State Aid approval was subsequently announced in March 2014.

The tax changes announced will be introduced from April 2014, and legislated at Finance Bill 2014.

In addition the Chancellor is seeking further state aid clearance to increase the rate of relief to 25% for all qualifying expenditure when re-notifying film tax relief in 2015 – demonstrating the Government’s continued commitment to the sector and its cultural and economic contribution.

UK Screen members interested in viewing our consultation submission documents will find them in the Members' Area.

See also UK Tax Reliefs.