EU gives go-ahead to £200m UK film tax relief

film tax relief

Government plans first announced in the Budget in March,  for a new rate of tax relief for the British film industry have been approved by the EU, meaning that film productions will now receive a tax credit of 25% on all qualifying expenditure in-line with TV tax relief, costing the taxpayer an estimated £200m over the next five years

Chancellor George Osborne announced the scheme, which will be backdated to apply from April 2015, while visiting the set of Agatha Raisin, a new British TV series being filmed in Wiltshire that is benefiting from the government’s high-end TV tax relief.

Osborne said: ‘A key part of our long-term economic plan is supporting our creative industries that contribute billions to the economy and provide millions of jobs.

‘We want to see more films, like Gravity and Avengers: Age of Ultron, made in Britain and that’s why we’ve made our film tax relief even more generous.’

Previously, the rate was 25% for the first £20m of qualifying expenditure and 20% for spending above this threshold. The March Budget announcement of an extension that would increase the rate of film tax relief to 25% for all qualifying productions had to be given State Aid approval by the EU. This has now happened, which means it can go ahead as planned.

For a film to be eligible for relief, it must be certified as British by passing a cultural test administered by the Department for Culture, Media and Sport (DCMS) (though the British Film Institute actually administrate the scheme on a day to day basis) or qualifying as an official co-production.

In addition, a minimum of 25% of its budget must be spent on UK qualifying production expenditure.

According to the policy costing document published at the time of the March Budget, the additional film tax relief is estimated to cost around £200m in tax relief over the five-year period through to 2020, as detailed in the original TIIN.

The total cost of the relief is estimated to break down as £5m in 2015/16, £30m in 2016/17, around £50m for the next two years, and rising to £60m in 2019/20, although it says there is uncertainty over the size of the tax base and the behavioural response to the new scheme.

The Treasury says the government’s film tax relief has supported almost £8bn of production expenditure since its introduction, including films such as Oscar winning Gravity, Skyfall, Paddington, The Theory of Everything, Mr Turner, The Imitation Game, and Harry Potter and the Deathly Hallows.

Amanda Nevill, CEO of the British Film Institute (BFI), said: ‘The film tax relief is a key ingredient in the UK’s winning combination of outstanding filmmaking talent and crews, world-leading studios and facilities, and iconic locations.

‘It keeps us competitive on the world stage, and helps grow our economy and create jobs at home.’

According to BFI figures, film tax relief supported 222 films in 2014, which together spent £1.4bn in the UK, up from £1.1bn in 2013 and the highest figure on record.

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Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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