U.K. Confirms Bolstered Tax Incentives for Big-Budget Movies
LONDON – The British government on Wednesday outlined its latest annual budget, with the entertainment industry once again paying attention to updates on incentives schemes, which came in the form of confirmations of previously unveiled measures.
George Osborne, chancellor of the exchequer, the U.K. equivalent of other countries' treasury secretary or finance minister, presented the budget, his fifth since the government led by Prime Minister David Cameron took over, starting at 12:30 p.m. London time. The annual budget speech draws much TV and other news coverage here.
In his budget, he confirmed a previously announced bolstering of tax incentives for big movies and the planned launch of incentives for stage productions, including plays, musical, operas and dance shows, among others.
The U.K. government had first mentioned in December that it would strengthen the tax credits available for bigger-budget movies. It had back then said it would make relief available at 25 percent on the first $32.7 million (20 million pounds) of qualifying production expenditures and 20 percent thereafter, for both small and large budget films, starting in April. Tuesday's budget confirmed that.
So far, productions with a budget of $32.7 million (20 million) or less could apply for the 25 percent tax credit, while projects with a budget higher than that could claim only a 20 percent rebate.
The government also reiterated that it would reduce the minimum U.K. expenditure requirement from 25 percent to 10 percent. It will also "modernize" the so-called "cultural test," a system used to confirm projects that are eligible for the tax incentives. Under the revamped tests, projects must get a pass grade on at least 18 of 35 points.
In a brief mention of the successful incentives, Osborne told the U.K. parliament's House of Commons Tuesday: "We are supporting our creative industries, too. The European Commission has today approved the extension of our film tax credit, and I will apply the same successful approach to theater, especially regional theater, from this September."
There will be a 20 percent tax relief for qualified stage productions and 25 percent for regional touring productions, he said.
Last year, Osborne had used his March budget speech to confirm the launch of tax incentives for high-end TV productions, animation projects and video games, designed to avoid runaway production and keep the U.K. an attractive location for Hollywood shoots. Those incentives are being continued with some tweaks.
"The government will extend video games tax relief to goods and services provided from within the European Economic area and apply a cap on subcontracting of $1.6 million (£1 million) per game, subject to state aid clearance," the budget document said. "The legislation will also be clarified so that only those games and television programs qualifying for relief will be treated as separate trades."
The British government on Tuesday raised its 2014 GDP growth forecast from 2.4 percent to 2.7 percent and its 2015 forecast from 2.2 percent to 2.3 percent. It slightly lowered its forecasts for 2017 and 2018 though. No developed economy is growing faster than the British economy now, but the U.K. continues to focus on building the resilience of its economy and must further lower the budget deficit, Osborne said Tuesday.
Just as last year, in comments of interest to high net worth individuals, Osborne said that the government will continue to close tax loopholes. He previously said that the government would "name and shame" tax avoiders in an effort to bring in unpaid taxes.