What is the UK Independent Film Credit (IFTC)?

The UK Independent Film Credit (IFTC) was introduced in the 2024 Spring Budget and only films with a Budget up to £15million are eligible.

At the Spring Budget 2024, the then Chancellor announced the introduction of the UK Independent Film Credit (IFTC). Eligible films will be able to claim enhanced Audio Visual Expenditure Credit at the rate of 53% on qualifying expenditure. A notional corporation tax charge of 25% will be applied to the credit which is restricted to 80% of Core Expenditure. In simple terms this `nets out` to 31.8% of total core expenditure. Therefore, a film with total core expenditure of say £5million will be eligible for a tax credit of £1590,000 (31.8%).

Films will also need to meet criteria set out in a new British Film Institute (BFI) test whereby they will need to meet the following criteria:-

-have a UK writer or,

-have a UK Director or,

-be certified as an official UK co-production.

The relief is only eligible for films with a Budget up to £15million. If a film’s Budget, which was previously approved as being eligible for IFTC subsequently exceeds £15m, the production company will be entitled to elect to either continue to claim IFTC at 53% (up to a maximum of £6.35m on a spend of £15m) or AVEC which allows for a relief of 34% on core expenditure irrespective of the films costs. If this scenario arises, which in practical terms is likely when unforeseen costs exceed Budget, it is approximately worthwhile to claim for IFTC up to a spend of around £18.7m before switching the claim to AVEC.

Also for a film to qualify for IFTC, principal photography should have commenced on or after 1^st April 2024. The claim cannot be submitted before 1^st April 2025. It is anticipated that there will be a high volume of claims from April 2025 and this will of course present a potential serious cash flow problem for producers. The BFI is employing an additional 5 people to help with the enhanced workload.

In order for the IFTC to become law, we are awaiting the issue of a Statutory Instrument which will include the final details of the new relief. Lisa Tandy, Secretary of State for Culture, Media and Sport has indicated that there will not be any major changes to the proposed legislation. Further, Kier Starmer, speaking at an event outlining the Labour Party Creative Manifesto inferred full support for the relief. It is worth noting that the present Film Tax regime was originally introduced by the Labour Party.

Whist we await the issue of the Statutory Instrument, the main established UK banks are unable to lend against the new proposed relief. This obviously presents a major problem at present, although we know that several independent financiers are taking a calculated risk and lending against IFTC proposed reliefs.

A final point to bear in mind is IFTC will need to be supported by additional documentation when costs have been incurred by related parties or sister companies. The claim needs to show that these costs were borne at arms length or commercial rates.

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