The UK government has introduced a new tax credit that will allow indie film producers in the region to claim 53% of their production expenditures.
The Independent Film Tax Credit (IFTC)—which was announced yesterday at a federal spring budget presentation—is available for films with budgets of up to US$19.1 million. Praising the initiative in a reaction statement, Animation UK estimates that it will effectively yield a roughly 40% tax break.
“Our sector anticipates a significant impact, propelling animation production in the UK even further,” said Kate O’Connor, the industry org’s executive chair. In the same statement, leaders from animation studios including Aardman Animations (Sean Clarke), Lupus Films (Ruth Fielding) and GFM Animation (Sean Feeney) were similarly encouraged, saying this tax credit should help level the financing playing field between the UK and North America, as well as supporting British producers in making more high-quality content for local and international audiences.
To qualify, productions need to have a theatrical release (the credit won’t apply to TV projects), and they must have started principal photography on or after April 1, 2024. Only expenditures incurred from that date can be claimed. Productions must also have a UK writer or director on board, or be certified as an official UK co-production by the BFI.
This is an optional and additional credit for productions that have already qualified for the UK’s Audio-Visual Expenditure Credit (AVEC). But the maximum amount a film can receive with the IFTC is US$8.1 million. More details about the new credit are available online.
The government also scored points yesterday with the announcement of a proposal to upgrade the incentives for visual effects. Under the proposed changes, there will no longer be an 80% cap on total eligible expenditures for a production’s VFX spend. (This currently leads many producers to outsource 20% of their VFX work to international partners, according to the UK Screen Alliance.) And the max VFX spend (pre-tax) that qualifies for AVEC will be increased from 34% to 39%.
These shifts are expected to generate an additional US$223 million of VFX work in the UK market—representing a 32% increase since before the pandemic, according to the UK Screen Alliance. They will also create an estimated 2,000 new jobs in the VFX field specifically, and another 800 peripherally related ones.
Stakeholders have 10 weeks to respond to the government’s proposals, which are expected to take effect in April 2025. The UK Screen Alliance will be submitting a response to this request for consultation.
“This is a major breakthrough,” said the org’s CEO, Neil Hatton. “Before, productions would either film in the UK or do their VFX here, but rarely both, because of the cap on tax relief. That will no longer be the case, and the significant growth potential in the UK’s VFX sector will now be unlocked.”