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January 21, 2014
Increased rate of relief for larger budget films:
- The Government announced an increase in the rate of tax relief for films with a qualifying expenditure in excess of £20 million. From April 2014, all films will receive 25% of the first £20 million of qualifying UK expenditure, with any excess qualifying expenditure still receiving a 20% tax credit.
- This means that producers of larger budget films will receive an increase of 5% on the first £20 million – namely, an additional £1,000,000 of tax relief.
- The Government has also announced that it will seek EU State Aid clearance to increase the rate of relief to 25% for all qualifying expenditure on larger budget films when it renotifies the film tax relief in 2015.
- The existing 25% tax relief on lower budget films and on high end TV and non-film animation productions remains unchanged.
Reduction in the level of UK expenditure:
- Since the introduction of the tax credit regime in 2007, at least 25% of total qualifying expenditure on a film has had to be UK expenditure in order to qualify for any UK tax credit. This minimum UK spend threshold for film productions will now be reduced to 10%.
- This will help independent production companies by encouraging minority co-productions on which the UK spend is less than 25%.
- The 25% floor will still apply to high end TV and non-film animation productions.
Modernised Cultural Test for feature films: 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 proposals have not been published yet, but good news for the industry is expected.
Boosts for other UK creative industries:
- Theatre: The Government intends to introduce new support for theatres from April 2015, with a formal consultation to be launched in early 2014 that will consider a limited tax relief for commercial theatre productions and a targeted tax relief for theatres investing in new works or touring productions to regional theatres.
- Digital Village: Investment of £5 million in the National Film and Television School’s Digital Village, to expand and upgrade its existing facility into a world-class training centre to provide a sustainable supply of UK talent for the digital and creative industries.This supplements the 2013 Budget announcements where the Government committed £16 million, industry match-funded, to support creative, digital skills in the UK and £15 million for innovative digital media content creation.
The changes are subject to EU State Aid clearance. That is currently being sought and is expected to be in place prior to April 2014.
Today’s announcement is more excellent news for the UK’s creative industries. 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 world-class VFX houses, thereby addressing the current loss of such work to overseas suppliers.
Overall, it is further public recognition by the Government not only of the opportunities for growth of the UK creative industries in a global market but of the valuable contribution these sectors make to the country’s economy.
This news comes after the introduction earlier in the year of the new UK high-end TV tax credit, following a campaign spearheaded by Wiggin partner, Charles Moore. The high-end TV tax credit has resulted in a fresh influx of television production work to the UK and a genuine and tangible impact on both the industry and the wider economy.