Film Tax Relief

The UK’s film and high-end television tax reliefs are widely recognised as the most transparent, inclusive and reliable production incentives in the world.

Find out how your feature film can benefit.

Film Tax Relief

Value

  • For all British qualifying films of any budget level, the Film Production Company (FPC) can claim a payable cash rebate of up to 25% on UK qualifying expenditure.
  • The Tax Relief is capped at 80% of the core expenditure i.e. even if you have 100% UK-qualifying expenditure, tax relief is only payable on up to 80%.
  • There is no limit on the budget of the film or the amount of relief payable within the 80% cap.

Qualifying as British via the cultural test

The Cultural Test for film and high-end television is points-based, with sections relating to content, cultural contribution, location, and cast and crew.
Projects need to achieve at least 18 from a possible 35 points.
The sections are:
• Cultural content
• Cultural contribution
• Cultural hubs
• Cultural practitioners

Qualifying as a British co-production

The UK has film co-production agreements with Australia, Canada, China, France, India, Israel, Jamaica, Morocco, New Zealand, Occupied Palestinian Territories, and South Africa. Of these, Australia, Canada, New Zealand, Israel and the Occupied Palestinian Territories also allow for television programmes.

The UK is also a signatory to the European Convention on Cinematographic Co-production.
• There must be a UK production company responsible for all UK elements of the production from beginning to completion.
• There must be corresponding production companies in the other co-producing party countries.
• There must be a co-producer in each country, and an application lodged in each country.
• The decision will be made jointly by the authority in each country.
• The filmmaking contribution from each country will be in proportion to the finance from each country.

For more information on co-productions, please visit the BFI website

Film Production Company (FPC)

  • The FPC responsible for the film must be within the UK corporation tax net.
  • Must make the arrangements for pre-production, principal photography, VFX, post & delivery.
  • It is best to incorporate sooner rather than later so costs can be included towards Tax Relief claim
  • Can be a UK ‘off-the-shelf’ company set up on behalf of an international parent company.
  • Work can be sub-contracted as long as this is reflected in the FPC’s accounts.
  • Loan-out companies can be used as long as this is reflected in the FPC’s accounts

Intention for theatrical release

  • There must be an intention for theatrical release.

If there is any doubt about the intention, the following factors would count in favour of the film being intended for theatrical release:

  • a finance plan written on the basis that the film will be released theatrically;
  • a normal full-length or short feature film of a type commonly shown at cinemas;
  • production in a format suitable for theatrical showing at the commercial cinema;
  • payment to actors and other participants on terms in line with those prevailing for cinema films (rather than, for example, television work), and;
  • the relevant person can demonstrate, at the end of the relevant accounting period, the intention to seek a contract to present the film in the cinema.

A factor which would count against an intention for theatrical release is where there are no commercial cinemas that show the particular type of film.

For more information, please read HMRC’s detailed guidance. 

Minimum UK expenditure and included costs

At least 10% of the film’s core expenditure must be UK expenditure.

 

Included costs

  • UK-qualifying production expenditure is defined as expenditure ‘used or consumed’ in the UK i.e. costs incurred by the FPC on filming activities (pre-production, principal photography, visual effects and post production) that take place within the UK, irrespective of the nationality of the persons carrying out the activity.
  • Above-the-line, including actors and directors, is included, irrespective of nationality.
  • Core expenditure incurred at a later stage on a project where there are ‘residuals’ to be paid will attract further relief; for example further payments to actors and directors.

 

Excluded costs

  • Bond
  • Financing
  • Option payments for book rights
  • Development
  • Entertainment
  • Publicity
  • E + O insurance
  • Capital Expenditure

VFX/Post

There is no obligation to carry out all production activity in the UK; it is possible to qualify for the UK Film Tax Relief by carrying out elements of the production process in the UK, e.g. VFX/post or principal photography, as long as the minimum expenditure requirement is met (10%) and all other qualifying criteria are satisfied.

Even if only certain elements of the production process are taking place in the UK e.g. VFX/post, it is essential that the FPC is incorporated in the UK as early as possible in order to qualify for the UK Film Tax Relief.

In addition to VFX/post/soundtrack recording costs qualifying for the UK Film Tax Relief, the prorated ‘neutral’ costs (qualifying costs which are spread throughout the production process, including senior producers, writers, director, insurances) will also qualify whilst activity is based in the UK i.e. if VFX/post/soundtrack recording costs amount to 20% of the total core expenditure, 20% of ‘neutral’ costs will also qualify whilst activity is based in the UK.

See case studies below for further information.

Additional info

  • Interim claims can be made – at the conclusion of principal photography, for example – so that pro-rated tax relief can contribute to post-production costs.
  • There is no cap on funds available.
  • There is no ‘sunset’ date.
  • The Tax Relief has been supported and maintained by both leading UK political parties.
  • The UK’s planned exit from the European Union will not negatively impact the Film Tax Relief.
  • The UK has a range of national and regional filming incentives which can be combined with the Film Tax Relief.
  • It is possible to combine the UK Film Tax Relief with incentives from non-UK jurisdictions either under a Production Service Agreement or by qualifying as an official co-production.

How to apply

You will need:

  • DCMS British Film certificate (interim/final) which you will receive via the British Film Institute’s (BFI) Certification Department as a result of qualifying as a British film
  • Statutory accounts
  • Tax return

 

Turnaround Times                                           

For straight forward claims:

  • BFI (DCMS) turnaround time is approximately 21 days.
  • HM Revenue & Customs turnaround time is approximately 28 days.

Contact

Contact us for further guidance on UK tax reliefs and how to qualify as a British production.

Contact the BFI to find out how to apply for certification as an official British production under the cultural test or as a co-production.

Anna Mansi, Head of Certification
+44 (0)20 7173 3214
anna.mansi@bfi.org.uk

 

Contact HMRC to find out how to apply for UK Creative Sector Tax Reliefs.
Manchester Incentives and Reliefs Team
+44 (0)30 0051 0191
creative.industries@hmrc.gsi.gov.uk

Case Studies

Below are just two examples of how you can qualify for the UK film tax relief.

VFX/Post case study

A script that has been developed in the US needs to shoot in a location with sand dunes or tundra for its principal photography, but the studio/producer wants to bring VFX, post, and the soundtrack recording to the UK.

Core expenditure is allocated as follows:

Activities
Preparing costings and shooting schedule- Non-UK
Rehearsals-  Non-UK
Principal Photography- Non-UK
VFX/Post-production/Soundtrack recording- UK

As the project has satisfied all qualifying criteria i.e. the UK FPC is incorporated in the UK during early prep, the VFX/post/soundtrack recording is then carried out in the UK and the costs of which exceed the minimum UK-qualifying spend of 10%; then the VFX/post/soundtrack recording costs will qualify for the UK Film Tax Relief.

In addition to VFX/post/soundtrack recording costs qualifying for the UK Film Tax Relief, the prorated ‘neutral’ costs (qualifying costs which are spread throughout the production process, including senior producers, writers, director, insurances) will also qualify whilst activity is based in the UK i.e. if VFX/post/soundtrack recording costs amount to 20% of the total core expenditure, 20% of ‘neutral’ costs will also qualify whilst activity is based in the UK.

This same structure would also apply to any other element of the production process ‘used or consumed’ in UK, e.g. principal photography, as long as the minimum UK-qualifying spend, and all other qualifying criteria are satisfied.

Screenwriter case study

An FPC owns the film rights for a book, and decides to make a feature based on it. It enlists a screenwriter to prepare the initial drafts of a screenplay and to rework them into a script which is used as the basis of filming.  The nature of the services provided by a screenwriter is the provision of a script.

The script is used as follows:

Activities
Preparing costings and shooting schedule- UK
Rehearsals-  UK
Principal Photography-  Part UK, part overseas
VFX/Post-production/Soundtrack recording- Part UK, part overseas

These costs will be pro-rated, meaning all UK-qualifying spend is eligible for Tax Relief.