Introduction of the
Independent Film Tax Credit

Campaign
Overview

In 2017, Pact launched a campaign to increase the Film Tax Credit to 40% for films made in the UK with a £2 – 10 million budget, with a review of the cap on spend. As part of our campaign, we published a comprehensive study of the health of the UK independent film sector, The State of the Independent Film Sector. It found that:  

• Since 2017, the independent film industry has been buffeted by unprecedented difficulties. Some are permanent structural changes, such as digital distribution and increasing competition for audiences. Other difficulties are cyclical, such as the global financial crisis and uncertainty around digital models.
• These difficulties have reduced the international market value for UK independent films. This is estimated to be a decline of around 50% since 2007. Which in turn has made it even more difficult for producers to secure financing for independent films.  
• These trends have exacerbated existing issues around the sustainability of film production companies, with many now choosing to expand into High-end Television drama.
• This lack of sustainability has potential limitations for the future economic and cultural impacts of the sector.  

The report was used to engage with the Government at the time. The Government were worried about a potential EU State Aid investigation, as the UK hadn’t yet left the European Union. As a result, the proposal wasn’t accepted by the Government.

In 2022, the BFI published their Economic Review of UK Independent Film, which suggested that the UK’s independent film sector was now at the point of market failure, and recommended an enhanced film tax relief (up to a budget cap) to address this. Following this review, Pact commissioned research from Oliver and Ohlbaum Associates to look at the challenges facing the independent film sector and how the Film Tax Relief could be better adjusted to support film makers. Their report, A Review of the Challenges Facing UK Independent Film and the Impact of Tax Relief Support, found that: 

• The indie film sector is a significant contributor to the economy, generating approximately 7,300 jobs per year and £380m Gross Value Added (GVA) per year.
• Post-pandemic the market has become even more challenging for indie producers with cinema audiences not reaching pre-pandemic levels and global economic factors driving an increase in the cost of labour and materials. 
• Independent film production spend has decreased, leading to a downward cycle with declining box office share, with the market share of UK indie films decreasing considerably to 5% in 2021 and 8% in 2022; the lowest levels since 2016.
• To better support the indie film sector, the Film Tax Relief should be increased to 53% Audiovisual Expenditure Credit (AVEC) for films with a budget between £1 – 15 million. The Film Tax Relief is established as the most successful intervention supporting the UK screen sector and an enhanced relief would raise the level of independent and culturally British filmmaking significantly.  

Alongside this report, we commissioned Alma Economics to examine the role independent film production plays in launching new talent. Their report, Measuring the Spillover Benefits of UK Independent Films, found that:  

• Films with budgets over £15m don’t launch the careers of new directors and producers in the UK, whereas films with budgets under £15m, which tend to be indie films, produce a spillover benefit by incubating talent.  
• Every £1 of spend on the production budgets of low budget UK films supports around £0.20 of subsequent filmmaking activity.

These reports were used to engage with others across the sector, many of whom were supportive of these proposals, and formed a key part of Pact’s response to the Culture, Media and Sport’s (CMS) Committee inquiry into British Film and High-End Television. In January 2024, Pact CEO, John McVay gave evidence to the Committee as part of this inquiry and highlighted the difficulties the sector has been facing and outlined Pact’s proposal to increase the Film Tax Relief. The Chair of the CMS Committee wrote to the Chancellor urging him to implement Pact’s proposals.

Campaign
Impact

Following a long campaign and support from others across the sector, the Government announced the introduction of the Independent Film Tax Credit (IFTC) at the Spring Budget 2024, aimed at all feature film productions that can meet an enhanced cultural test and have a budget of under £15 million.

The IFTC uplifts the Audiovisual Expenditure Credit from 34% to 53% for qualifying films, helping to address the long-standing market failure within independent film by stimulating investment and supporting growth and jobs across the UK.