In today's global production environment, many international film production centres are introducing or enhancing their film tax incentive offers in order to remain competitive. Without a rebate, production centres find themselves at a disadvantage when looking to attract inward investment or retain domestic production.
In order to raise finance for your production, it is essential to create a budget that outlines your specifications without any unnecessary costs. One of the most important things to decide is where to shoot.
In today's global production environment, many European and international film production centres are introducing or enhancing their film tax incentive offers in order to remain competitive. The UK offers a substantial tax incentive, subject to specific requirements being met and as a result is often considered as an option when budgeting.
The UK's current film tax relief system was introduced in 2007 and is widely acknowledged to be an essential part of financing for domestic and international projects shooting in the UK. The UK system provides generous tax relief for film and high-end television, and is available on qualifying UK production expenditure on the lower of either: 80% of total core expenditure; or the UK core expenditure incurred.
Films with total core expenditure of £20 million or less can claim tax relief of up to 25% on UK qualifying production expenditure. For films with a core expenditure of more than £20 million, the production company can claim tax relief of up to 25% on the first £20 million of UK qualifying expenditure and 20% thereafter. Subject to EU ratification, this is set to change so that all films will qualify for the up to 25% tax relief.
High-end television and animation tax relief was introduced in the UK on 1st April 2013. Since then, the minimum UK expenditure requirement for television tax relief has reduced from 25% to 10%; with the reduction being applied to animation too. Like film, television tax relief is available on qualifying UK production expenditure on the lower of either: 80% of total core expenditure; or the UK core expenditure incurred.
In 2015, the government announced that the higher rate of 25% relief would be given to films made with budgets over £20million. The rules surrounding qualifying a film as British and the UK tax relief have been detailed in our insight article UK Film Tax Relief.
In addition to the tax relief, the British Film Institute administers a fund that British qualifying films may apply for.
Other regional funds include:
For more film agencies, see the British Film Institute website.
In order to ensure the accuracy of a budget, it is important to understand whether a production incentive applies to particular labour costs. The UK operates on a used and consumed basis, and so all labour qualifies as long as it is used within the United Kingdom. Unlike some countries, the UK boasts a deep crew base, so it is unlikely that significant overseas labour would be required.
Despite filming in the UK, it is important to understand the labour costs and requirements of any country in case you end up employing international cast and crew. For example, a first assistant director based in Los Angeles may be used to a different pay rate than their UK counterpart.
Sargent-Disc has analysed industry pay scales for a range of crew in different departments and grades in the UK to help when budgeting for production. The pay scales are currently available to Sargent Disc payroll customers through the online payroll portal SD Online 2.0.
Rates of pay in some countries are determined by collective union agreements. In the UK rates can be agreed on an individual basis. However, there are at least two below the line departments in the UK film industry that have negotiated agreements outlining rates of pay. These are the PACT/BECTU major US studio feature film construction agreement and the PACT/BECTU major studio feature electricians agreement. Rates for performers can be found in the PACT/Equity Cinema Agreement and specific arrangements exist for low budget and very low budget films.
It is important to budget for UK fringes when planning to shoot in the UK. These include social security and workplace pension contributions.
UK National Insurance contributions are required from all Pay As You Earn (PAYE) workers, with employers contributing 13.8% of earnings. However, performers and certain other workers are deemed as self-employed and can be exempt from this. For more information on which roles can be deemed to be self-employed in the entertainment industry, see HMRC's guidelines.
Changes to UK pension legislation ensure that all qualifying workers automatically receive the employer pension contributions they are entitled to from the employer's Staging Date. The staging of companies is being phased in until the 1st of February 2018. Currently, staged employers are required to make a minimum contribution of 1% of Qualifying Earnings, with employees doing the same until October 2017 when this will increase to 2% employer and 3% employee. From October 2018 employers will have to pay 3% with employees paying 5%.
Workplace Pension Reform Auto Enrolment introduces complex rules and obligations on the employer. In order to assist productions Sargent-Disc has developed an integrated solution that works with our payroll service and automates many time consuming processes for the employer. For more information, see our insight article on Auto Enrolment.
Industry standard software is available to help when putting together a budget. Movie Magic Budgeting 7 has been designed to assist with complex budgeting scenarios. It allows for elements to be pulled through from Movie Magic Scheduling, helping to save time and ensure accuracy. It also allows for multiple incentives, credits, and rebates to be applied, compared, and analysed. For a video guide, see below:
For producers and accountants, analysing and keeping up to date with tax rebates in different jurisdictions and building the variables into a budget can be complicated. An extremely valuable resource for assisting in understanding the differences and similarities between the incentives is the Entertainment Partners' website. Their production incentives information is detailed by individual jurisdiction, and allows for incentives to be compared against each other.
At Sargent-Disc, one of our Production Accountants can certify your budget. Sargent-Disc can also provide a range of services to a production, from pre-production through to post. This includes our suite of digital production tools including, SD Online Payroll, Digital Purchase Order, SD Production Card, Movie Magic Scheduling and Budgeting, and Vista Accounting Software. For information about our services, please contact us at Sargent-Disc. Let us help you with your production and employment enquiries about working in the UK, and take the drama out of your production.
For advice, guidance and facts about international production incentives, and to compare them online, visit the incentive solutions section of the Entertainment Partners website or contact them directly here:
Incentives Solutions Group
Joseph Chianese, Senior Vice President
There are a number of specialist accountancy and audit firms in
the UK that advise clients when structuring British qualifying
projects. Here are just a few:
Grant Thornton UK LLP
Christine Corner, Partner
Tel: +44 (0)20 7728 3171
John Graydon, Partner
Tel: +44 (0)20 7841 4281
Steve Joberns, Principal
Tel: +44 (0)20 7312 6558