Tips for obtaining Film Tax Credits

To help make the producer’s life a little easier here is a simple step by step guide to what's needed to obtain a Film Tax Credit

At the end of each workshop or presentation I attend the question most often asked is `What one piece of advice would you give to a Producer?`

The answer is quite simple and I guess fairly obvious ‘plan ahead and have everything in place before you start`

Easier said than done, and alas, this strategy is often not applied. When unprepared the result for the producer is unnecessary administrative disruption and at worse can mean losing out on valuable tax benefits.

To help make the producer’s life a little easier here is a simple step by step guide to what’s needed to obtain an Independent Film Tax Credit.

Set up a Special Purpose Vehicle (SPV)

Form a Limited Liability Company. This will be a SPV for the film. For the sake of transparency, simplicity and for legal reasons we recommend a SPV for each and every film.

Shareholders Agreement

Determine the split of shares at the outset between founders and creative talent who may possibly have some proprietorial ownership in the project. This will avoid any potential misunderstanding or disputes down the line. As and when the Producer obtains Equity finance, this will probably change the Shareholding but at least there is a clear agreement up front.

Bank Account

Open a bank account. This can often take longer than expected, especially if there is a participant based overseas.

VAT

Register for VAT.  A considerable amount of production expenditure will attract VAT at 20% and this can be reclaimed each month.

Interim Certificate

Obtain an Interim Certificate from the British Film Institute (BFI).

For this you’ll need to submit the following documents:

• synopsis or treatment of the screenplay
• shooting schedule
• production budget
• copy of the chain of title

Bear in mind there is a currently a 16 week waiting list for Interim Certificates. Without this certificate it be practically impossible to secure finance for the film.

Calculating the Film Tax Credit claim

Calculate how much Film Tax Credit may be due. A media accountant will work this out by reviewing the budget and detailing the core expenditure that is eligible for the tax credit.

Most productions will seek to finance the tax credit which is only given by HMRC upon the production of company accounts , when of course the costs have already been paid out. In order to obtain finance for the Film Tax Credit the Producer will need an interim BFI certificate, outline the films total financing plan and obtain an Opinion Letter from an accountant confirming the quantum of the anticipated tax credit claim.

Make sure your contracts are watertight

The producer should appoint a lawyer at an early stage to review copyright issues and make sure that all contracts are watertight.

Have insurance in place for your production

Obtain adequate insurance cover for production liability, equipment coverage and public liability.

Independent Film Tax Credit is worthwhile

Yes, there are quite a few hoops to jump through, but the benefit of obtaining an Independent Film Tax Credit of 31.8% if your film’s budget is up to £15m makes this a worthwhile exercise.

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