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Details revealed of UK’s new 40% Independent Film Tax Credit

Source: Adobestock composite

Shooting in the UK

Details have emerged from the UK government on the long-awaited enhanced tax support for UK indie films, termed the UK Independent Film Tax Credit (IFTC), unveiled as part of chancellor Jeremy Hunt’s spring budget today (March 6).

Under the IFTC, eligible films will be able to opt-in to claim enhanced Audio-Visual Expenditure Credit (AVEC), at a rate of 53%, on their qualifying expenditure, which equates to around 40% in relief.

To be eligible for the IFTC, films will need to have production budgets (excluding marketing and distribution) of up to £15m. There is no lower budget limit.

Films will also need to meet criteria set out in a new British Film Institute (BFI) test, with the expectation films will need to meet at least one of the following conditions: have a UK writer; a UK director; or; be certified as an official UK co-production.

Productions must have started principal photography on or after April 1 2024, and only expenditure incurred on or after April 1 2024 can be claimed.

If claiming the IFTC, separate claims for the newly-introduced 5% visual effects and animation uplifts cannot be made, because the ITFC rate of 53% has been specifically calculated based on independent film sector trends. The IFTC will not be available for TV programmes. Productions will need to have a theatrical release to qualify.

The IFTC will be an optional enhanced tax credit for productions that already meet the conditions of AVEC, which includes, but is not limited to, productions certified as culturally British by the BFI; productions made by a UK production company; and at least 10% of a production’s core expenditure must be used or consumed in the UK.

A qualifying company can claim the IFTC on up to 80% of its core expenditure on a film, or on the amount of UK core expenditure, if that is less. This means that a film with a £15m budget would have a maximum of £15m total core expenditure, of which £12m (80%) would qualify for ITFC, provided all of that £12m was used and consumed in the UK.

The credit is subject to corporation tax at the applicable rate.

The BFI will assess film budgets to certify that IFTC films meet the budget condition. If a film’s budget subsequently exceeds £15m, the production company can choose either to continue to claim IFTC at 53% up to a maximum of £6.36m credit before tax, or choose instead to claim AVEC at 34% on all its qualifying expenditure.

Claims can be submitted to HMRC from April 1 2025 onwards, in respect of expenditure incurred from April 1 2024, provided a film began principal photography after April 1 2024.

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