U.K. Government Ups Film Tax Credit

Measures should attract more Hollywood pix to shoot in the U.K., and benefit U.K. indie films

LONDON — The U.K. government is to increase the tax credits for bigger-budget pics, which will benefit many Hollywood movies. Other changes will benefit U.K. indie pics. The VFX sector, in particular, should receive a boost from the changes.

The government will make relief available at 25% on the first £20 million ($32.7 million) of qualifying production expenditure, and 20% thereafter, for both small and large budget films, from April 2014.

Previously productions with a budget of £20 million ($32.7 million) or less could apply for a 25% tax rebate, while pics with a budget higher than that could claim only a 20% rebate.

George Osborne, who as Chancellor heads government finance policy, announced the measures in Parliament on Thursday.

The government will also reduce the minimum U.K. expenditure requirement from 25% to 10%, which will help U.K. independent production companies by encouraging minority co-productions.

It also will “modernize the cultural test,” which will be expanded to allow for European as well as British culture.

It will also increase the rate of relief to 25% for all qualifying expenditure in 2015.

The government announced that it would invest £5 million ($8.17 million) in the National Film and Television School’s Digital Village to expand and upgrade its existing facility into a world-class training center.

Adrian Wootton, chief executive of the British Film Commission and Film London, said: “The U.K. is home to world-class filmmaking talent and expertise, which help drive the industry forward, as demonstrated recently by the U.K.-produced and critically-acclaimed ‘Gravity.’

“However, in order to continue to attract business to the U.K. in a fiercely competitive global marketplace, our industry must be underpinned by effective fiscal incentives. The tax relief was a game changer when introduced in 2007 and today’s announcement ensures we can continue to grow our industry, boosting the U.K. economy and creating British jobs; it will also encourage the production of more culturally British projects.”

British Film Institute CEO, Amanda Nevill, commented: “Having just come back from China, which is one of the most exciting new markets for film in the world, it’s fantastic that the Chancellor is doing so much to ensure U.K. film is positioned in the strongest possible way.”

John Graydon, partner in the accountancy firm Saffery Champness, specialists in film and television tax incentives, said, “Today’s news will make it easier to make films in the U.K. The changes means that large-budget films will receive more tax relief and find it easier to qualify. The new measures more closely reflect changes in the filmmaking process, which have a direct bearing on international producers and their decision-making in bringing VFX work to the UK.

“The U.K. has all of the key elements for attracting international film production and the first three quarters of this year has seen growth of 28% in the level of inward investment film production. Ensuring the U.K.’s financial incentives support its creative and digital technology expertise and capabilities underlines the U.K.’s positioning as world leader in this international business and its potential for growth.

“In addition, lowering the minimum U.K. spend requirement to 10% and adjusting the cultural test will allow more productions to come to the U.K., and will also help U.K. independent production companies develop co-production partnerships, and in turn open up creative and commercial opportunities for U.K. companies, cast and crew.”

The amendments to the tax credit should boost the number of Hollywood pics bringing their effects work to the U.K. Among recent Hollywood pix to use U.K. VFX facilities were “Hunger Games: Catching Fire,” “Rush,” “Gravity,” “Fast & Furious 6,” “Thor: The Dark World” and “Captain Phillips.”

Alex Hope, managing director of post-production house Double Negative (“Hunger Games: Catching Fire,” “Thor: The Dark World,” “Captain Phillips”), said: “Adjusting the film tax relief so that it reflects changes in the production process will enable the U.K. industry to capitalize on its strengths in VFX and cutting-edge production technologies. This makes financial and creative sense.

“Digital technologies have transformed the filmmaking process, and will continue to do so, giving film-makers new ways to tell their stories. VFX sits in the vanguard of these changes, with increases in VFX budgets from between 10% and 50% of the overall budget. This can be £20 million-£25 million on just one film.

“It is vital that the U.K. has an integrated approach to the digital future of the film industry. The government has recognized this with the support announced in April’s budget for R&D into digital content production through the Technology Strategy Board, and support for skills development in the sector, through the Skills Investment Fund.

“Today’s announcement is crucial in giving VFX companies confidence to continue investing in their U.K.-based operations and generating further growth for film and the creative industries.

“Over the past 15 years the U.K.’s VFX businesses have made significant investment in infrastructure, skills and training and the U.K. has established itself as a global center for VFX, winning Academy Awards, and securing further incoming production business.

“The U.K. film industry has benefited from being able to offer a complete service covering all aspects filmmaking activity, but until today’s announcement the structure of the tax relief, whilst attracting production activity to the U.K., has resulted in some films shooting in the U.K. taking VFX work overseas.

“Today’s measures target the integral role of VFX in filmmaking and productions that would not otherwise qualify for tax relief and incentivize them to bring VFX or production business to the U.K., representing a significant growth opportunity for the U.K. film industry.”

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