Latest Changes to UK Film & TV Incentives

May 2024

Latest Changes to UK Film & TV Incentives

In recent weeks, there have been significant, potentially game-changing, developments in the UK incentives for film and TV productions.  Legislation has been passed that makes the UK an even more attractive place to produce.

Please find a detailed overview below, but in summary, the key takeaways are:

The UK Tax Credit (UKTC) has been replaced with the Audio Visual Expenditure Credit (AVEC) – Please find more detail about the key differences between these below. In summary, however, there is little economic impact, just a few new wrinkles which we can help iron out.

A huge boost for Visual Effects – If your project has material VFX expenditure, the UK is now an excellent destination as VFX expenditure will, from 1 April 2025, attract relief at 29.25%.  And this can be claimed in addition to AVEC on all other UK spend which would otherwise be limited to 80%.

A new Independent Film Tax Credit (IFTC) – The IFTC gives a gross credit before tax of 53%, giving a net credit after tax of 39.75% on core expenditure (capped at 80% of the budget) for an ‘Independent film’.  This will elevate the already reliable and widely trusted UK tax relief offering to amongst the highest available in Europe.

Global Rule 1 Exemption – Films produced entirely in the UK may also benefit from the PACT/Equity exemption from SAG Global Rule 1 – meaning they could be free from SAG residual requirements.

Additional Funding for Films Fully Produced in the UK – These films would also be eligible for BFI and regional funding (Scottish Screen, North East Screen, Liverpool City Council, Film Wales, Northern Ireland Screen).  We act for most of the regional funders, so we can advise those looking to access such regional funding.

 

Audio Visual Expenditure Credit (AVEC)

  • AVEC is available to a production company incorporated in the UK and subject to UK tax and is only available for qualifying British productions. This was the case with the UKTC too.
  • It applies to the same notion of “core” (i.e. production and post-production, but not development, finance or distribution) expenditure used or consumed in the UK, up to a cap of 80% of the budget (as with the UKTC);
  • For film and “High End TV”, AVEC provides for a gross credit, before tax, of 34%, but this is subject to mandatory corporation tax at 25%, giving a net credit after tax of 25.5% (marginally more than the UKTC of 25%).
  • For animation (film or TV) and children’s TV, the gross credit, before mandatory tax, is 39%, giving a net credit after tax of 29.25% (more than the current UKTC of 25%).
  • The definition of “High End TV” remains the same:
  • £1m per 1 hour slot length.
  • It continues to apply to drama, comedy and documentaries, and exclude news, sport, game shows and factual entertainment.
  • The minimum slot length has been reduced from 30 minutes (UKTC) to 20 minutes (AVEC).
  • A clamant can switch between film (intended for theatrical release) to High End TV, provided the other qualification requirements for High End TV are met.

There are some notable differences with AVEC from the UKTC, principally:

  • Transactions with connected parties (owned or controlled by the same, or related, entities or people) have to be at “arm’s length” and are subject to scrutiny by HMRC; and
  • the credit cannot be claimed if, at the time of application, the claimant company is in administration or liquidation.
  • The Timing:
  • AVEC can be claimed on core expenditure incurred on or after 1 January 2024;
  • Only AVEC (and not UKTC) can be claimed for productions starting principal photography on or after 1 April 2025; and
  • from 1 April 2027 only AVEC can be claimed – UKTC will cease entirely.

 

 

The New Independent Film Tax Credit (IFTC)

Most exciting of all is the announcement of the new Independent Film Tax Credit (IFTC) which gives a gross credit before tax of 53%, giving a net credit after tax of 39.75% on core expenditure (capped at 80% of the budget) for an ‘Independent film’.  Details are awaited, but to qualify for the IFTC the production must:

  1. be a film (intended for theatrical release) and otherwise meet the requirements for AVEC;
  2. be ‘independent’ – currently envisaged as being defined through having a production budget of up to £15m;
  3. also meet one of the following requirements:
  • have a UK writer; or
  • have a UK director; or
  • be certified as an official co-production.

The IFTC will be capable of being claimed on core expenditure incurred from 1 April 2024 on films starting principal photography after 1 April 2024, but will only be able to be claimed from 1 April 2025.

 

Lee & Thompson’s unrivalled Film & Television Group is the largest team of specialist lawyers outside of the US, offering a one-stop shop for clients involved in the creation and exploitation of content.

The UK has always been a beacon for US creators and investors, drawn by our shared language, a wealth of British talent and the steadfastness of the US currency. And now our tax credit framework is even more robust and attractive than ever before.

We’re perfectly placed to advise you on all aspects of producing in the UK.

For more information on our work, have a look at L&T’s latest Film & TV Brochure.

 

Should you wish to meet and discuss any of the above, we will be in Cannes from Friday 17th May until Tuesday 21st May and would be delighted to meet and explore the opportunities that these developments present.

Alternatively, we would welcome the opportunity to discuss this further at your convenience.

Please do get in touch with a member of our Media Finance team.

samtatton-brown@leeandthompson.com

stephenspence@leeandthompson.com

christosmichaels@leeandthompson.com

nickiparfitt@leeandthompson.com

leestone@leeandthompson.com

johanewing@leeandthompson.com