Chancellor Jeremy Hunt unveiled the changes in today’s (March 6) Spring budget
By Mona Tabbara 6 Mar 2024
UK-qualifying films budgeted up to £15m will now receive tax relief of 40% following the introduction of the long-awaited ’indie tax credit’ aimed at reinvigorating the homegrown production sector.
Chancellor Jeremy Hunt unveiled the changes in today’s (March 6) Spring budget.
”I committed to providing more tax relief for visual effects in film and high end TV,” Hunt also said. ”I can today confirm that we will increase the rate of tax credit by 5% and remove the 80% cap for visual effects costs in the audiovisual expenditure credits.”
A 40% relief on business rates for UK studio facilities has also been introduced.
Films and high-end TV (HETV) programmes currently have a headline credit rate of 34%. This equates to 25.5% in actual relief, capped at 80% of core expenditure, but with no budget limit. The Audio-Visual Expenditure Credit (AVEC), a reform from the film and TV tax relief system, came into play at the start of this year, and equated to a small increase on the 25% previously available.
Screen understands the revised incentive will see a 53.33% AVEC for films under the budget range, which will equate to 40% in relief. Full details are yet to be confirmed.
”We have become Europe’s largest film and TV production centre with Idris Elba, Keira Knightley and Orlando Bloom all filming their latest productions here,” said Hunt. ”Studio space in the UK has doubled in the last three years and at the current rate of expansion, next year, we will be second only to Hollywood globally.
”In the autumn statement, I committed to providing more tax relief for visual effects in film and high end TV,” Hunt continued. ”I can today confirm that we will increase the rate of tax credit by 5% and remove the 80% cap for visual effects costs in the audiovisual expenditure credits. Having worked closely with the culture secretary and listened carefully to representations from companies like Pinewood, Warner Brothers and Sky Studios, we will provide eligible film studios in England with a 40% relief on their gross business rates until 2034.
”And having heard representations from the British film industry, Pact and indeed the prime minister, we will introduce a new tax credit for UK independent films with a budget of less than 15 million pounds.”
The tax incentive was first introduced in 2007, and has been praised for helping to attract billions of pounds in inward investment money from the US streamers and studios, reaching record levels in 2022, when inward investment films and HETV delivered £5.4bn. Last year, inward investment and co-production spend on film and high-end television in the UK reached £3.31bn.
To qualify for the UK’s creative sector tax incentives, all films, animation and television programmes or video games must be certified as British through the cultural test or qualify as an official co-production.
Calls for enhanced support for the ailing UK independent production sector have been ongoing for several years, with producers’ organisation Pact a key driver in the lobbying efforts, first proposing the 40% figure in 2017.
An enhanced tax credit has been a key focus of the written submissions and ongoing oral evidence provided to the UK parliament’s cross-party Culture, Media and Sport (CMS) committee, with Pact, the BFI, Film4, BBC Film, Creative UK, Screen Scotland, Producers’ Collective UK, Paramount and the Screen Alliance North among those calling for it.
For some, the changes unveiled today may not go far enough. The 40% tax credit is not only available to independent producers but can also be accessed by studios and streamers if they shift towards more modestly-budgeted features coming in at under the £15m mark.
Pact, in its written submission to the CMS committee, said focusing on budget level as opposed to a definition of independent “could have unintended consequences and lead to a potential gaming of the system”.
Sixteen Films producer Rebecca O’Brien said in her evidence to the committee, “Some additional fiscal support for this particular sector is essential. We could really die without it.”
UK independent producers have been in dire straits, struggling to compete with the might of inward investment from the US studios and streamers, that have sucked up talent, IP rights, crew and studio space in return for handsome sums that the indies cannot compete with. Meanwhile, the BFI, BBC Film and Film4 as funders are faced with limited financial resources, while production costs continue to soar.
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