The UK Film Tax Credit

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The UK Film Tax Credit

• Steve Joberns

23 October 2008
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Get in the game What do I need to qualify?

• Need to qualify as British
• Culturally British
• Approved co-production
• Genuine theatrical intent
• And 25 of the production (core) budget must be
  used or consumed in the UK

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UK India Co-Production

• Rules as before, qualification dictated by
  individual treaties
• Administered by UK Film Council Certification
  Unit
• Must apply for provisional approval between four
  to six weeks from principal photography
• Minimum 20 and maximum 80 financial
  contribution from either country
• Up to four co-producers can take part
• Watch for 3rd country costs

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How do I get the credit?

• Credit now administered by HM Revenue, not
  private funds such as the sale and leaseback
  operators
• Based around the company statutory accounts and
  corporation tax return
• Specialist Revenue office now set up to deal with
  all claims in Manchester.

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How do I get the credit? (continued)

• Must make sure that the UK co-producing company
  qualifies as the film production company and
  makes an effective creative, technical and
  artistic contribution
• Choice of company year end now key
• Possible to make multiple applications with
  shortened accounting periods
• Timing when will I get my money?

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Potential pitfalls

• Greater emphasis on compliance
• VAT
• PAYE/NIC
• Foreign Entertainers
• Deferrals
• Year end reporting, P35s, P11Ds, Class1A NIC
• Revenue enquiry?

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How much is it worth?

• Co-production only look at costs of UK
  producer, capped at 80 of core spend in UK.
• Excluded costs (financing, bond, marketing,
  entertaining)
• Development costs?
• The famous used or consumed test

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How much is it worth? (continued)

• 25 of core expenditure in the UK for budgets
  lt20m (limited budget films), 20 of core
  expenditure in the UK for all other films
• Remember max of 80 core expenditure in the UK,
  so credit limited to 20 for limited budget films
  and 16 for other films
• Go elsewhere for the other 20?

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Examples of Value of Tax Credit
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Auditors Role

• Overall structuring advice
• Opinion letter for the bank
• Audit of application process to UK Film Council
• Preparation of statutory accounts
• Preparation and submission of tax returns
• Dealing with Inspector

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Other considerations

• Production accountant
• Reporting requirements
• Other financier requirements
• IOM, UK Film Council, regional bodies
• Form 64-8