The motion picture industry is booming – how can tax reliefs help production companies thrive?
Tax Reliefs (including R&D)
Film and television has long held a strong cultural and economic significance in the UK. From James Bond, to The Crown and Game of Thrones, our nation often leads the way when it comes to TV and film.
There’s no denying that the industry has faced it’s fair share of challenges over the last 18 months. However, it has bounced back and is now booming with £5.64bn having been spent on film and TV production throughout 2021.
With the industry continuing to grow, production companies need to understand the tax reliefs available to them, to help them further thrive in the years to come.
The production industry landscape today
Much like the rest of UK business, 2020 was a year of turmoil for film and TV. Highly anticipated shows and films were pushed back and cinema admission fell by 75%. This cumulated in the Government revealing a £500m fund to help the production companies to start rolling their cameras again.
Having recovered from the pandemic quicker than almost all other sectors, it’s now one of the UK’s strongest industries. The future looks really positive too. Demand from cinemas is on the rise as COVID restrictions continue to lift, and Los Angeles-based Sunset Studios have announced that they are planning to set up base in Hertfordshire, promising new productions and creating more than 1000 new jobs.
The role of Film and High End Television Tax Relief
Film and High End Television Tax Reliefs have played a monumental role in the resilience of the industry, making the UK an internationally attractive base for production companies to start rolling their cameras. And while there are other pots of funding available to production companies, tax relief offers a level of security – allowing companies to rest assured knowing that the relief doesn’t have to be repaid further down the line.
Since their inception Film Tax Relief (FTR) and High End Television Tax Relief (HETR) have paid out a phenomenal £20.2bn and £1.5bn respectively. FTR in particular has been a real driver of industry growth – increasing the annual average number of films shot in the UK from 39 to 65 since their inception less than 10 years ago providing far more outputs than has been given out in relief.
What are the reliefs and how do they work?
Film and High End Television Tax Reliefs allow production companies to claim up to a maximum of 80% of their qualifying production expenditure, providing an invaluable opportunity for businesses to unlock trapped cash in their business.
As of 2021, production companies are also able to switch between the two reliefs - meaning that businesses won’t miss out if they decide to change their distribution method during the production process.
Much like the rest of the Government’s Creative Industries Tax Reliefs, in order to qualify for FTR and HETR, productions will need to pass a British cultural test. Other eligibility requirements for both FTR and HETR include:
- At least 10% of core production costs must relate to UK activity
- The production must be intended for broadcast or theatrical release
For High End Television there are additional requirements:
- The programme must be either a drama, comedy or documentary
- The average core costs need to be at least £1m/hour slot
The slot length needs to be greater than 30 minutes
How does loss relief work?
Thousands of production companies won’t start to generate a profit until the production is finalised. If this is the case for your business, you don’t have to worry about missing out on the relief, as losses can be surrendered for a tax credit of up to 25%, as long as the loss occurs pre-production or in the relevant later period. The latter of which is the stage at which the production is either completed or abandoned.
But it’s worth keeping in mind that loss relief is a technical and complicated area, so we would always recommend consulting an expert on the matter before submitting a claim.
The road ahead
As the production industry continues to bounce back from the pandemic, now is the right time for television and film production companies to start planning ahead and making the most of the opportunities on offer.
From assessing eligibility through to analysing qualifying production costs and claim submission, our tax incentives and reliefs team in Newcastle can help to ensure you’re truly maximising the amount of relief available to you.