Independent Film Tax Credit (IFTC)

At the 2024 Spring Budget, the Chancellor announced the UK Independent Film Tax Credit (IFTC). Under IFTC, eligible films will be able to opt-in to claim enhanced Audio-Visual Expenditure Credit (AVEC) at a rate of 53% on their qualifying expenditure. After tax this equates to an effective net rate of 39.75% (subject to the 80% cap).

On 9 October the government laid a Statutory Instrument (2024 No.1009) giving further detail.

BFI certificates can be applied for from 30 October 2024.

The IFTC can be claimed on projects with core expenditure that does not exceed £23,500,000.

Principal conditions

• Independent Film Tax Credit applies to films where core expenditure in relation to the film does not exceed £23,500,000,

• The IFTC can be claimed on £15,000,000 of qualifying core spend,
• The 80% cap will still apply,
• The film must have begun principal photography on or after 1 April 2024,
• It will apply to expenditure incurred on or after 1 April 2024 and claims can be submitted to HMRC after 1 April 2025,
• A new British Film Institute (BFI) test will apply and films will need to meet one of the following conditions:
  • Have a UK writer (national or resident), or
  • Have a UK director (national or resident), or
  • Be certified as an official UK co-production.
• The film will need to be certified as a low-budget film by the BFI,
• The film must be intended for theatrical release, and
• The IFTC will be an optional enhanced tax credit for productions that already meet the conditions of AVEC.

Exceptions

• If claiming the Independent Film Tax Credit, it’s our understanding that separate claims for the proposed visual effects uplift cannot be made, and
• The IFTC will not be available for TV programmes.

Further details on the BFI test

If there is more than one director or scriptwriter, the following rules apply:

• A director of a film is a lead director if the contribution made by them to the film in that role is greater than or equal to the contribution made by each other director to the film in that role, and
• A scriptwriter of a film is a lead scriptwriter if the contribution made by them to the film in that role is greater than or equal to the contribution made by each other scriptwriter to the film in that role.

How to claim

The credit will be calculated in the same manner as AVEC on “core expenditure”:

• Expenditure which is incurred on production activities, and not ancillary activities such as marketing, distribution or financing costs,
• A qualifying company can claim the Independent Film Tax Credit (IFTC) on up to 80% of its core expenditure on a film, or on the amount of UK core expenditure, if that is less. This means that a film with a £15 million budget would have a maximum of £15 million total core expenditure, of which £12 million (80%) would qualify for IFTC, provided all of that £12 million was used or consumed in the UK,
• The qualifying expenditure figure is multiplied by the credit rate of 53% to give the amount of the “above the line” credit before tax. The maximum credit a film can receive is £6.36 million, which is based on the maximum amount a film would be entitled to if it had total core expenditure of £15 million. The maximum cash repayable element of this would be £4.77 million assuming a corporation tax rate of 25%,
• The credit is subject to corporation tax at the applicable rate and must be set against any other tax liabilities of the company before it can be paid to the company as cash, and
• The BFI will assess film budgets to certify that IFTC films meet the budget condition.

As always there are and will be more questions and we will seek clarity where needed. If you have any questions, please contact your usual Saffery contact or speak to Nigel Walde.