Independent Film Tax Credit (IFTC) becomes law

By Alliotts LLP

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The long awaited Independent Film Tax Credit has been formally passed into law

The Chancellor of the Exchequer, Rachel Reeves and the Culture Secretary, Lisa Nandy have officially passed the new enhanced Audio Visual Expenditure Credit (AVEC), known as Independent Film Tax Credit (IFTC). The IFTC was first announced under the last government as part of its 2024 Spring budget. It was thankfully rushed into the Finance Act in May prior to the General Election.

The IFTC effectively gives a cash rebate of 40% on 80% of Total Core Expenditure. The 80% cap goes back to when the UK was part of the European Community, allowing productions to spend the balance of 20% in other countries. Post Brexit the cap alas has remained. Relief for IFTC is available to Producers from 30^th October. The British Film Institute (BFI) has employed an additional five employees to handle the expected increase in claims. Productions currently claiming AVEC, which gives Producers a cash rebate of 25.5% on 80% of Total Core Expenditure now have 6 months to submit a claim for IFTC.

IFTC is available for films with Budgets up to £15m.

Films will need to meet the criteria set out in a new BFI test and the expectation is that films will need to meet at least one of the following conditions:

have a UK writer or
have a UK director or
be certified as an official co-production

Productions qualifying for IFTC must have started principal photography on or after 1^st April 2024. Only expenditure incurred on or after 1^st April 2024 is eligible.

There is no taper on the £15m cap. For productions that exceed £15m alas perhaps due to poor budgeting or unforeseen costs, the claim is fixed at £15m expenditure. But it should be noted that there is a tipping point at £23.5m whereby up to this sum it is beneficial to claim IFTC and above this amount the production should claim AVEC.

It remains to be seen whether the 80% cap will be removed for VFX costs claimed within AVEC. This was proposed by the previous Government.

The new IFTC has been warmly greeted by the film industry. Independent productions were struggling amid rising costs, competition from overseas territories with more favourable tax credits and deep pocketed streamers. This new incentive means UK productions that were considering going overseas remain in the UK whilst the UK is now a much more favourable destination for overseas productions: we anticipate this will particularly apply to the US Indie market.

Apart from the Independent film market we have to thank The Producers Alliance for Cinema and Television (PACT) and the BFI for their work in lobbying the government to get this new incentive.

If you have any questions about the Independent Film Tax Credit please speak to a member of the Alliotts team.

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