Autumn Statement: Good News For The Film Industry

by Reed Smith

Changes to the UK Film Tax Credit

The changes announced in the Autumn Statement to the UK film tax credit are welcome evidence of the government’s continued support for the audio-visual industry, following the April announcement of the tax credit for high-end TV and non-film animation projects.

The Exchequer estimates a benefit to the industry (and cost to the Exchequer) of £10m in 2014-2015, £20m in 2015-2016, and £25m in each of 2016-2017, 2017-2018 and 2018-2019. The effects of the Autumn Statement, as a whole, are revenue-neutral, so the film industry can consider itself favoured in recognition that “the creative industries not only make a valuable cultural contribution to the UK, they are also an important part of a dynamic and diversified economy” (Autumn Statement).

The changes are intended to stimulate further the UK film industry, and will:

  • make it more attractive to bring high-budget films to the UK;
  • encourage international co-productions where UK expenditure is less than 25%; and
  • encourage producers with a visual-effects budget of 10%-25% of the total budget to come to the UK for their visual effects.

There is currently great competition for production capability. Studios and producers have to weigh up the advantages and disadvantages of where to produce films. In addition to evaluating quality, experience, and history (where the UK has always excelled), they also seek value for money. So, they look at the incentives offered by countries – Canada, for example, offers both federal and regional tax credits to film producers – and at the cost of producing in different countries (including those in Eastern Europe) which are inherently cheaper than the UK, and weigh up these factors against the advantages of producing in the UK. The new measures announced give further weight to the arguments in favour of the UK.

The changes are summarised below. It is intended that those listed in paragraphs 1, 2 and 4 below will be enacted in the 2014 Finance Act, subject to EU State Aid-approval being obtained. This approval has been sought and is expected to be in place before April 2014.

1.  Increasing the rate of relief on the first £20m of qualifying UK expenditure from 20% to 25%

At the moment, the film tax credit rate is 25% if qualifying expenditure is less than £20m, and 20% if it is more than £20m. This gives rise to the anomaly that a £21m film generates less tax credit than a £19m film.

With effect from April 2014, relief will be 25% of the first £20m of UK qualifying expenditure, and 20% of UK qualifying expenditure in excess of £20m. It should be noted that relief continues to be given on the lesser of actual UK qualifying expenditure and 80% of core expenditure.

Not only does this change remove the anomaly, it also generates an additional £1m of tax credit for films with qualifying expenditure in excess of £20m, as shown in the example below.

Example for a film with UK qualifying expenditure of £50m (assuming this is not greater than 80% of total core expenditure). 


Post-April 2014

Qualifying Expenditure 


Tax Credit 

Qualifying Expenditure 


Tax Credit 







2.  Proposed increase in the rate of relief on qualifying UK expenditure exceeding £20m

The government will seek EU State Aid approval to increase the rate on the first £20m of UK qualifying expenditure to 25%, when it re-notifies the film tax credit relief in 2015. 25% would then be the rate applicable to all qualifying expenditure (as it is for high-end television and non-film animation productions). The example below shows the extra tax credit that might be generated. 

Example for a film with UK qualifying expenditure of £50m (assuming this is not greater than 80% of total core expenditure). 



Qualifying Expenditure 


Tax Credit 

Qualifying Expenditure 


Tax Credit 







3.  Reduction in the minimum level of UK expenditure from 25% to 10%

Currently, to qualify for the film tax relief, at least 25% of total qualifying expenditure for a film must be UK qualifying expenditure. With effect from April 2014, this will be reduced to 10% (although the 25% floor for high-value television and non-film animation productions will remain at 25%).

This will encourage European producers, in particular, to make co-productions with UK co-producers when they previously might not have done, because there was no tax benefit (i.e., where UK spend was between 10% and 25% of total spend).

More importantly, this is likely to be a boon for the UK visual-effects industry at a time when visual effects are becoming an increasingly important element of film production; and the UK is at the forefront of innovation, as showcased by Framestore’s involvement in Gravity.

At the moment, if a production’s visual effects budget is between 10% and 25% of the total budget (and it is not otherwise being shot or produced in the UK), there is no financial incentive for the producers to have their visual effects work done in the UK. That will now change, and should result in a greater influx of visual effects work into the UK, and go some way to answering the concern highlighted by HM Treasury in its consultation paper of 2013 that, “there have been recent reports of visual effects activity moving overseas, with job losses at a number of UK visual effects companies, and some evidence of UK-based companies looking to open new branches overseas.”

4.  Modernising the Cultural Test

The Cultural Test, which must be passed for a film production company to qualify for the film tax relief, will be modernised “to align it with incentives in other member states and to support visual effects and wider film production” (Autumn Statement). The details have not yet been published. This is likely to make it easier for films with European elements to pass the cultural test (if, for example, the film test is made similar to the test for high-end television programmes, where points are allocated where the programme is set in (and the characters are from) not just the UK but also the EEA). It is also likely to provide further incentive for undertaking visual effects work in the UK if (as seems probable) doing so assists a film to pass the test.

Two further measures were announced which benefit the creative industries:

£5m funding for National Film and Television School’s Digital Village

The Oscar- and BAFTA-winning National Film and Television School (whose alumni include David Yates, the director of four of the Harry Potter films) will receive an investment of £5m from the government to expand and upgrade its existing facility into a world-class training centre, to provide a sustainable supply of UK talent for the digital and creative industries.

Consultation on theatrical tax relief

The government intends to introduce new support for theatres, from April 2015, that recognises the unique value that the theatre sector brings to the UK economy. A formal consultation will be launched in early 2014 that will consider a limited tax relief for commercial theatre productions and a targeted tax relief for theatres investing in new works or touring productions to regional theatres.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

Written by:

Reed Smith

Reed Smith on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.