Tax Incentives

Overview

UK FILM TAX RELIEF: GUIDANCE

Northern Ireland is part of the UK and therefore the UK film tax relief applies. 

The new UK tax relief which came into effect on 1 January 2007 replaces the old Sale & Leaseback arrangements. 

Main features of film tax relief

The relief is aimed directly at film production companies and is not available to those whose only involvement in film-making is confined to providing or arranging finance.

In order to qualify, a film must meet three conditions. It must:

• be made to be shown commercially in cinemas;
• be certified as British either because it is an official co-production or because it satisfies a new cultural test administered by the Department for Culture Media and Sport; and
• incur at least 25% of its total production expenditure on film-making activities in the UK.

British films costing £20 million or less are eligible for an additional tax deduction of 100% of qualifying UK expenditure (which equates to a maximum of 80% of the total production budget) and to surrender losses in exchange for a cash payment of 25%, amounting to a benefit worth at least 20% of qualifying production costs.

British films costing more than £20 million will receive an additional deduction of 80% of qualifying UK expenditure and will be able to surrender losses in exchange for a cash payment of 20%, amounting to a benefit worth typically 16% of qualifying production costs.

Quick example

If your film budget is £1m, and you are able to spend £800,000 in the UK (i.e. 80% which is the maximum allowable – and it is qualifying spend), you could expect to receive a tax credit of £200,000 (25% of the qualifying spend).

Remember – it’s a sliding scale – so a quick calculation for budgets under £20 million would be to simply divide your UK qualifying spend by 4 in order to calculate the amount of tax relief.  For budgets over £20 million, divide by 5 to calculate the amount of tax relief.

Further information can be found on the UK Revenue and Customs website here

A good source of information including details on the Cultural Test can be found on the UK Film Council website here