HOW_ CAN_ YOU_ BENEFIT_ FROM_ UK_ FILM_ TAX_ RELIEF?
UK Film Tax Relief (FTR) was introduced in 2007 to encourage film and high-end television production in the UK, not only by domestic producers but by film makers from all over the world. It appears to have worked: since its introduction, we have seen a significant increase in production of British Qualifying Films in the UK.
Both small and large investors benefit from FTR, which provides approximately 20% of the production budget – a significant amount in any film’s finance plan.
How does FTR work?
- Film Tax Relief is available to British qualifying films and official co-productions.
- It requires a minimum production spend in the UK of at least 10% of the core expenditure.
- The relief is a cash rebate of up to 25% of UK qualifying expenditure, capped at 80% of core expenditure. Even if the UK spend is 100%, tax relief is only payable on up to 80% of the core production cost.
- The film must be intended for theatrical release and there is no budget limit on the amount to which the tax credit applies.
- The full qualification requirement can be found at: https://www.gov.uk/guidance/corporation-tax-creative-industry-tax-reliefs#film-tax-relief-ftr
What to look out for
Although the UK Film Tax Relief application process is straightforward, it is important that the process is correctly planned. We recommend you seek advice from a specialist firm of accountants, such as Silver Levene.
Over the years, we have found these are the main FTR pitfalls:
- Producers are still not aware that the relief is only for UK incorporated companies and can only be processed through HM Revenue & Customs (HMRC).
- Details of what constitutes a British film are often not properly researched.
- The inability to deal with the British Film Institute (BFI) can potentially mean non-certification.
- ‘Core expenditure’ dictates the amount of the relief available to the production company, but producers are often unsure what it means.
- If the tax credit is cash-flowed before receiving tax relief from HMRC, the timing must be accurate or the producer may be left with major, possibly ruinous borrowing.
- Producers who try to defraud HMRC over production costs can face criminal prosecution.
- Producers should incorporate a company as a Special Purpose Vehicle (SPV) and channel all production expenditure through it. This ring-fences production expenditure, leaving the producers free to decide what they do with the company in the future, without impacting their current business activities.
If there is one piece of advice we would give producers, it is this: plan well ahead of the application. Discuss your project in detail with us, so we can identify any problem areas and advise how to solve them. With our considerable experience in this area, we are happy to look at any project, at any stage of its life.