UK Film Industry Defends Tax Relief

by Jason Gorringe, Tax-News.com, London

08 June 2010

As the UK government looks to make swingeing cuts to its budget, a new report commissioned by the UK Film Council has concluded that the country's film tax relief is "vital" to sustaining current levels of global competitiveness and job creation and should be left in place.

According to the Film Council, the removal of the UK film tax relief would reduce the country's gross domestic product (GDP) by around GBP1.4bn (USD2bn) a year. That compares with a current cost of the film tax relief of around GBP110m a year, meaning that an extra GBP13 in GDP is generated for every GBP1 invested.

"It's clear to see just how important the film industry continues to be to the UK's economy," commented Ivan Dunleavy, Chief Executive of film studio firm Pinewood Shepperton plc. "The new coalition government has been extremely positive in recent times on issues such as the film tax credit which, along with the UK's skills and expertise, has helped to keep the UK competitive in a global market."

The UK film industry directly employs around 36,000 people, 30% more than in 2000, supporting a total of 100,000 direct and indirect jobs. Furthermore, the industry says that between 2000 and 2009, fixed capital investment in infrastructure and new technology has totalled almost GBP1.1bn. In 2009, capital investment in the core UK film industry is estimated to have been GBP147m, with most of the investment undertaken in the production sector.

The report's findings were welcomed by the government minister responsible for culture, communications and the creative industries, Ed Vaizey, who commented: "The creative industries are a British success story. They continue to grow, and the government sees the real potential they have to help our economy in the coming years. This report is evidence of how important British film is – to our economy as well as promoting our cultural life, our identity and diversity on the international stage."

Under the UK's current film tax relief scheme, introduced in 2007, relief can 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 recent Treasury figures, more than GBP100m in tax relief was claimed in 2008/09 to support the making of over 170 UK films.

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