BFI deputy CEO Harriet Finney said she is very optimistic the Independent Film Tax Credit (IFTC), or enhanced audio-visual credit for lower-budget film, is on track to be ratified under the new UK government.
”I assure you, there is a lot of work taking place behind the scenes,” said Finney, speaking at Screen’s ’The Future of UK Film’ Summit, held at the BFI Southbank yesterday (September 24).
“The DCMS [Department for Culture, Media and Sport] is working very, very hard on everything that needs to happen in terms of getting that statutory instrument laid.”
The IFTC, effectively an enhanced tax relief of 40% for films budgeted under £15m, was announced under the last Conservative government as part of its March spring budget, and went through into the Finance Act in May.
Since then, a surprise July general election was called and a new Labour government came into power.
“There have been very small windows where the government has been able to do any legislation,” Finney said.
”The last thing that needs to happen to bring this into force, to [be able to] issue certificates and finances, is [the government] needs to lay a statutory instrument, and that is what will set out all the detail which sits behind the proposal. It will set out the guidance and what people need to do.
“It’s not until that moment, when that statutory instrument is laid, that the BFI will be able to issue certificates, and the process will get going.”
Finney reassured: “It is an understood policy by the incoming government… They’re engaging very quickly.”
She was unable to give an indication of a date when the statutory instrument would come through. “It’s the government’s decision as to when they lay it. We’ve been at a lot of discussions at government talking around the urgency.”
Moses Nyachae, partner in the film and TV team at chartered accountants Saffery, echoed Finney’s confidence. He said the main question he is receiving from producers is if the IFTC is still going ahead. “There are no indications otherwise,” he confirmed. “It’s received royal assent, it’s in the act. We’re just waiting for that technical step where they release the statutory instrument, which gives a bit more detail behind the actual legislation.”
While producers cannot currently claim the IFTC, he said: “We’re working with producers who are certainly claiming the AVEC [Audio-Visual Expenditure Credit at its current rate of 34%] with the intention of retrospectively going back and claiming IFTC. We are also in discussions with various producers who are looking to potentially cashflow an amount hedged against or secured against the IFTC.
“That’s a bit more of a process, because we need to issue opinion letters to the likes of lenders like Coutts and Judith’s [Chan] team. At the moment, because the statutory instrument hasn’t been released yet, we can’t give a full opinion.”
Finney reassured producers the BFI was ready to deal with the anticipated rise in certification submissions once the IFTC is ready to be implemented.
“At the BFI, we’ve done a lot of work in terms of making sure that our certification unit is fully staffed,” she revealed. “We’re not only dealing with quite a high volume of backlog at the moment, we’ve brought on five new staff to help deal with what we’re anticipating will be a high demand for the IFTC.”
Coutts’ executive director of media banking Judith Chan noted: “We’re a bit in limbo, but we’re very excited about this. We’re preparing ourselves for when we can lend against this.”
Providing all goes ahead, claims can be made from April 1, 2025, for features under the £15m budget range, and which went into production after April 1, 2024. Eligible films will be able to opt-in to claim the enhanced Audio-Visual Expenditure Credit (AVEC), at a rate of 53% on up to 80% of core expenditure, which equates to around 40% in relief. While the cap will remain for IFTC, under the Conservative’s original plans for AVEC, the 80% cap would be removed as of April 1, 2025.
To qualify for IFTC, films need to meet the BFI’s existing cultural test for a UK film and additionally have a UK writer, UK director or be an official co-production; they also need to be intended for theatrical release.
If a film’s budget when in production 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.
Answering a question on concerns that streamers may end up using it most, Nyachae said: “Like with all of our other incentives, there is no cap, so it is open to as many productions as are able to be produced.”
Also on the panel was Nicky Bentham, producer at Neon Films and co-chair of trade body Pact’s film producers group. Her credits include Roger Michell’s 2020 title The Duke, starring Jim Broadbent and Helen Mirren, and the upcoming Brides, the feature directorial debut of theatre director Nadia Falls. She reinforced how critical the IFTC will be to indie filmmakers, who have reached a crisis point with regards to being able to secure budgets, get films into production and make a living.
Bentham was part of the Pact group who, in 2017, first proposed a 40% tax relief figure for independent film.
“Back in 2017, looking at trends and those numbers and how independent film wasn’t even being gradually eroded, but was happening at quite an alarming pace, I look back at that time and think – I wish we could go back to 2017 because right now it’s even tougher than that.”
Bentham has not directly used the promised IFTC to close a budget yet. “At the moment, there is only one lender I know of [Phil Hunt’s Head Gear Films] that’s lending against the IFTC, and other producers I know who have accessed it have done so through private guarantees or private sources,” said Bentham.
Later in the morning, Hunt confirmed on the ‘Money Talks’ panel: “We’ve funded about 15, 20 UK tax credits in the past six months… I’m taking risk.”
Zygi Kamasa, founder and chief executive of distribution and production outfit True Brit Entertainment who was also part of the ‘Money Talks’ discussion, confirmed he is using the promised enhanced tax credit to help build budgets for projects shot after April. “It’s a gamble worth taking,” he said, while noting it could be a “disaster” if it didn’t come through.
Bentham confirmed the planned IFTC had encouraged her to restructure a project to shoot in the UK that she had been planning to shoot abroad, due to financing being too difficult out of the UK.
“I was looking at how to make it as a co-production, out of necessity rather than a specific need for a location or country,” she said. “Now, I’ve brought that project back to be a completely UK film. It’s still very difficult financing. It’s not just the tax credit that will be transformative to producers, but hopefully the additional finance that it’s going to attract into the sector – financiers from around the world are now looking at the UK as a viable place to make independent film.”
She added that for producers keen to co-produce, it has also been transformative: “For a long time, co-producing with the UK seemed like it was more effort than it was worth. International producers are getting in touch now saying there is a way to do this in partnership.”
Producers: plight or fight?
Bentham’s concerns about the state of the UK indie sector were reflected in the panel: ‘UK Producers: State Of The Nation’, with production costs inflating, a squeeze for talent against the deep-pocked studios and streamers, the public funders’ budgets under pressure and a lack of financing avenues in the UK for indies all throwing the industry into turmoil.
“The state of the independent film sector is abysmal – I don’t think it’s been worse since I started working in the industry,” said Gillian Berrie of Sigma Films, whose credits include Jonathan Glazer’s Under The Skin and David Mackenzie’s Fuze starring Aaron Taylor-Johnson, which has just wrapped filming.
“There has to be government intervention at this point,” she said, in addition to the IFTC.
Fiona Lamptey, former director of UK features at Netflix who set up Juno Studios this year alongside fellow former Netflix execs, noted Juno is exploring non-traditional avenues of funding: “There are lots of investors that want to get into our industry and don’t have the skills or expertise, but have the money. Our position is to be strategic with our partnerships.”
Lamptey added Juno is also in the early days of looking at fan-funded entertainment. “How do we grow and nurture that audience, but also allow that audience to have a say about our output? What does that look like? How do we then retain ownership of that, or share ownership with the audience? I don’t feel as pessimistic [about the future of the industry].”
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