APPLYING UK FILM & HETV TAX INCENTIVES TO POST & VFX

There is no specific tax relief for VFX or post production in the UK, but both are allowable costs for the Film or High-End Television Tax Relief providing the qualifying criteria are met.

You do not need to perform all production activity in the UK and it is absolutely possible to claim UK tax relief for post and VFX only, even if no principal photograph occurs in the UK.

The rate of relief is 25%. The minimum expentiture requirement of 10% must be exceeded and the project must qualify as British via the Cultural Test. Note that there are sufficient points available in the Cultural Test to qualify based on only performing VFX or post in the UK.

It is essential to set up a UK based limited production company (FPC or TPC) before shooting begins in order to account for all production costs, even if only the post-production or VFX occurs in the UK.

Claiming pro-rated neutral costs

A little known feature of the UK tax reliefs is the ability to claim for pro-rated neutral costs in addition to the direct UK spend.

Qualifying neutral costs which are spread throughout the production such as senior producers, writers, directors and insurances may be claimed in proportion to the actual activity in the UK (e.g. if The UK spend on VFX, post or soundtrack recording costs make up say 22% of the budget, then 22% of the neutral costs will also qualify for UK Tax relief. )

By claiming pro-rated neutral costs in addition to the direct UK spend, the perceived tax relief rate on direct UK spend is raised above 25% and may even reach 30% depending on the production’s above-the-line costs. Note that the pro-rated neutral costs may also be used to lift the actual UK spend above the minimum 10% threshold if required.

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