Video-game, TV, and film producers in the UK will receive more generous tax incentives from Monday. This comes after industry warned that the UK could lose out on animation and special effects.
The government announced that all companies will receive a greater tax break under the revamped system. They also said they would have more flexibility in making production decisions, and more clarity on the credit amount.
The audio-visual and video-games tax credits will replace previous tax breaks for film, television and video games to expand the UK production industry.
Britain is a popular destination to shoot Hollywood blockbusters such as Barbie and Wonka. The UK’s tax relief cap means that work on visual effects is often outsourced to other countries, such as Canada, India, and Australia. France recently improved its tax incentives.
Neil Hatton is the CEO of UK Screen Alliance. An industry group. He has said that Britain “risks losing its position as a leader in this field” because the UK’s investment stagnated while other countries have made their tax incentives more attractive.
Treasury announced that under the new system a TV production for children, an animated TV production, or a film with qualifying expenditures of PS1m will receive PS42,500 additional in tax relief. The Treasury said that a high-end production of TV, film or video games will be eligible for a PS5,000 tax relief. Animation films and TV programmes will also be eligible for the increase in relief.
The British film industry is flourishing thanks to a tax incentive program that allows Hollywood studios to claim a 25% tax deduction on UK production costs since 2007. This scheme was extended in 2015 to include films of any budget level.
Hatton stated that the new measures would result in film and television benefiting from a 0.5% more generous rate of tax relief. This net rate is 25.5%. The same will apply to videogames.
Animation will gain more. Tax relief for core production costs has increased from 25% to 29,25%. Hatton stated that this was a “significant increase” for animation.
He pointed out that Ireland offers a 32% tax break for animation, Canada a 43%, and the Canary Islands – 50%. Hatton said, “They are really going for animation.”
Tax credits are only available for the first 80% budget of a UK film, which forces studios to outsource some work. Hatton stated that the UK Screen Alliance wants to see the visual effects cap lifted and tax relief for this area increased to “mid-30s”. He hopes that this will be included in the budget for 6 March. It could also create 3,000 high-tech jobs. Hatton stated that “you’ll often film in the UK because we offer a good tax credit to film”. We also have a good reputation when it comes to crews, locations, and studio infrastructure. Why would you choose to stay in the UK when it comes to visual effects? “There is no other incentive to stay in the UK when you can take your visual effects and Montreal and save 40%.”
Framestore, Cinesite MPC, and DNEG are four of the largest visual effects companies in the world. They were founded in the UK and remain there, but they have been expanding internationally in recent years.
Nigel Huddleston is the Financial Secretary to the Treasury. He said, “We will support the producers of the next Barbie and Happy Valley, as well as Grand Theft Auto, with this new generous tax credit system.
“The UK is the world’s leader in creativity and we want to make sure that this continues into the future, by making it easier to flourish for British films, TV, and video games.”