CMC Animation Exchange – Panel: Qualifying
Liz Brion Grant Thornton
Anna Mansi BFI
Jonathan Berger Harbottle & Lewis
The panel discussion, chaired by Mike Watts, explored how to find out if a programme qualifies for the tax incentive and the issues around qualifying expenditure.
- Anna Mansi who administers the Cultural Test at the BFI, laid out an overview explaining that much of the wording for the new tax break has been taken from the regulations for the tax incentives for film.
- In terms of defining animation it is a sequence of 2/3D moving images, taken as a series of single frames. There is a deliberate aim to leave this as flexible as possible.
- Only 51% of the programmes’ qualifying production costs are required to be spent on animation, and so mixed media productions are also allowed.
- The tax break applies to series with the requirement that the content is intended for broadcast (which includes the internet).
- Animation produced for advertising, news, current affairs programmes, competitions or training programmes is excluded.
- Jonathan Berger added that the claim must be made by a UK company or overseas company operating with the realm of the UK tax system. The intention is to bring overseas production into the UK, although that would usually involve a UK company or SPV being set up around the new series or commission.
- Liz Brion explained that in the case of co-productions, only one company can claim the UK tax benefit. This should be the company involved in every stage of the production. The panel all stressed the importance of clearly defining the company taking the lead in applying for relief.
- Only production costs can be applied for and tax credits of 25% are payable on 80% of core expenditure. The Revenue are not keen to subsidise speculative expenditure. Qualifying expenditure is production expenditure on pre–production, principal photography and post production of the programme.
- Detailed guidance will be published soon and it is expected that genuine recharges of costs incurred internally by the production company (regarding personnel, overheads etc) will be allowable as well as a production fee. It is vital to be able to substantiate costs being charged back in terms of overhead.
- In terms of minimum expenditure, at least 25% of core expenditure must relate to goods or services used or consumed in the UK.
- The programme must satisfy a cultural test based on a points system or fall under one of the UK’s approved co-production treaties (Australia, Canada, New Zealand, France, Israel, Palestine). The BFI will operate this test, as it does for the film tax break. Again, detailed guidance is expected to be published shortly, but to be eligible for relief a production must score at least 16 points out of a possible 31. Points can be awarded for setting (including European and not just UK locations), adding value to British creativity, diversity or heritage, where the work takes place, employing key British staff and talent. There are also points available for ‘undetermined locations’ to cover fantasy settings.
- Although guidelines are yet to be published in full, and the relief won’t officially come in until after Royal assent in July, draft applications are already available online and an interim certificate and a letter of comfort can be issued by the BFI between now and when official certificates become available in August. Costs can be backdated to 1st April after the certificate has been received.
The panel closed on an upbeat tone, pointing out that much of the animation tax credit has been borrowed from the film tax credit, which is already a proven success. This is a very positive indication for animation.