Lords Call For More Generous UK Film Tax Relief

by Jason Gorringe, Tax-News.com, London

27 January 2010

A House of Lords committee has called on the UK government to provide more substantial tax breaks for low budget British film and television productions and suggested that new tax breaks be considered to support the country's computer game developers.

In its first report on the British film and television industry, published on January 25, the Lords Communication Committee argued that the tax relief level on UK films with a budget of less than GBP5m (USD8.1m) should be raised from 20% to 30% to help independent British filmmakers to fund their productions.

The peers also proposed that the government should consider introducing an extension of the film tax credit to children's programming on a trial basis, given a 48% fall in spending on children's programming since 2003.

"British films are a major industry with more potential to expand," commented Lord Fowler, Chairman of the House of Lords Communications Committee.

Under the UK's current film tax relief scheme, introduced in 2007, relief can only be claimed on production expenditure incurred in the UK, up to a maximum of 80% of the total budget. A higher rate of relief is available for limited-budget films (those with total production expenditure of GBP20m or less). For a film to be eligible it must qualify as British, either by passing the "cultural test" administered by the Department for Culture, Media and Sport, or under an agreed co-production treaty. Additionally, at least 25% of the total production expenditure must be incurred in the UK.

According to the Treasury, more than GBP100m (USD160m) in tax relief was claimed in 2008/09 to support the making of over 170 UK films. However, UK feature film production spend dropped from GBP840m in 2006 to GBP578m in 2008, and some industry experts suggest that there is link between falling spend and the replacement of the old "section 48" incentive scheme in 2007.

The Lords committee also called on the government to give consideration to the introduction of tax incentives for the video games industry in the UK, noting that such schemes exist in competitor countries such as France and Canada.

“We recognize the claims of the video games industry for support in the face of foreign government-subsidized competition, and recommend that the government consider providing tax incentives for video games production,” the committee said.

The report was welcomed by TIGA, the trade association representing the UK’s games industry, which has relentlessly lobbied for tax breaks to support the industry and last month presented a 67-page report to the government in support of its case.

“It is very encouraging that the cross-party, highly respected House of Lords Communications Committee has recommended that the government should consider providing tax incentives for video games production," commented Richard Wilson, CEO of TIGA.

Wilson also noted that Ed Vaizey, Conservative Party Shadow Arts Minister, would seek to introduce a tax measure supportive of the video games sector within two to three years of a Conservative administration, if the Party was to be elected.

"TIGA’s Games Tax Relief campaign is gaining significant supporters," he said. "We will continue to advance the case to HM Treasury.”

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