Finance for Film and High-End Television Tax Credits

Film productions with core expenditure under £23.5m can claim Independent Film Tax Credit

Film productions with core expenditure under £23.5m can claim Independent Film Tax Credit (known as IFTC and subject to certain conditions) of 53% of 80% of spend. From this sum there is a notional Corporation Tax charge of 25%. The net tax credit equates to 40% of 80% of Total Core Expenditure or 31.8% of Total Core expenditure. In other words, a production with total core expenditure of £5m will be eligible for a cash rebate of £1,590,000.

This relief is capped at £15m and therefore productions with a budget above £23.5m need to claim under Audio Visual Expenditure Credit (AVEC) which nets out at 20.4% of Total Core Expenditure. TV projects with a minimum spend of £1m per 60 minute episode (subject to the minimum length per episode being 20 minutes) are also eligible to make an AVEC claim

This is all good news, particularly for the Independent Film sector which is experiencing a huge boost following the enhanced tax credit announcement last year. But, as Shakespeare’s` Hamlet observed ‘There’s a rub’, you only get the tax credit after you have spent the money.

Major studios will effectively finance the tax credit and pay themselves back when it arrives from HMRC. Other productions, and this amounts to around 80% of the market will borrow against the tax credit. Lenders include leading banks, various finance houses and high net wealth individuals. The cost of lending will be dependent on several factors including the track record of production company, how and where the balance of finance is coming from, the makeup of the budget and the film schedule. Generally, finance will run at around 1% to 1.5% per month and overall cost will include legal fees and an arrangement fee. Lenders advance around 80% to 100% of the projected Film or High-End TV tax credit and will seek an opinion letter from an accountant confirming the quantum of the estimated tax rebate.

Finance costs can and will be mitigated by the production by making an Interim Claim. Whilst productions can only apply for final certification if they have completed production and it is ready to be released, they are able to apply for interim certification at any point in production or development. Interim claims have therefore become commonplace. In the 2023/24 year there were 431 interim film claims and 211 interim claims for High End TV. The total final certification claims in the same period was 535 and 244 respectively.

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