Film, TV and video-game producers will get more generous tax breaks in the UK from Monday, amid industry warnings that the country could lose out to others, particularly in animation and special effects.
The government said all companies would receive more tax relief under a revamp of the current system, along with greater flexibility over production decisions and clarity about the amount of credit they can expect.
To expand the UK’s production industry, the audio-visual expenditure credit and the video-games expenditure credit will replace the previous tax reliefs for film, TV and video games.
Britain is a popular destination to shoot Hollywood blockbusters such as Barbie and Wonka. However, the cap on UK tax relief means work on visual effects often goes to countries such as Canada, India and Australia. France has also improved its tax incentive recently.
Neil Hatton, the chief executive of the UK Screen Alliance, an industry body,has said Britain is “at risk of losing our position as a world leader in this area” because investment in the UK had stagnated, while other countries had made their tax breaks more attractive.
Under the new system, a children’s TV production, animated TV production or film with £1m of qualifying expenditure will receive an additional £42,500 in tax relief, the Treasury said. A high-end TV production, film production or video game will receive £5,000 in relief. The uplift in relief for animation will be extended to include animated films as well as TV programmes.
Britain’s film industry has thrived thanks in part to an incentive scheme allowing Hollywood studios to claim 25% tax relief on UK production expenditure since 2007, which was extended to films of all budget levels in 2015.
Hatton said the new measures meant film and TV would benefit from 0.5% more generous tax relief, a net rate of 25.5%. This will also apply to video games.
Animation will benefit more. Tax relief on the core production costs, has risen from 25% to 29.25%. “That’s a significant uplift for animation,” Hatton said.
He noted that Ireland offered 32% tax relief for animation, Canada 43% and the Canary Islands 50%. “They’re really going for it,” Hatton added.
The other barrier holding back the UK is that tax credits only apply to the first 80% of a film’s UK budget, leading studios to move some work to other countries. The UK Screen Alliance is campaigning for the cap to be lifted for visual effects, and for tax relief in this area to rise to the “mid-30s”, Hatton said. He hopes this will happen in the budget on 6 March, adding that it could create 3,000 hi-tech jobs.
“Very often you’ll film in the UK, because we have a very good tax credit for filming,” Hatton said. “We also have a very good reputation in terms of crews and locations and studio infrastructure. But when you get to your visual effects, why would you stay in the UK? There is no further incentive when you could take your visual effects to Montreal and gain the best part of 40% on that additional expenditure.”
Four of the world’s biggest visual effects companies – Framestore, Cinesite, MPC and DNEG – were launched and are still headquartered in the UK, but have focused on expanding overseas in recent years.
Nigel Huddleston, the financial secretary to the Treasury, said: “We are backing the makers of the next Barbie, Happy Valley and Grand Theft Auto with this new, more generous, tax credit system for British production talent.
“The UK is a world leader in creativity, and we want to ensure that continues well into the future by making it easier for British film, TV and video games to thrive.”
