In response to increased production and budget levels seen by the Industry over the last few years, Pact Council has agreed that the levy rates charged for both domestic and overseas productions in the UK should be reassessed.

Furthermore, as a result of SVOD commissioning and the impact of Covid-19 on viewing habits, the distinction between TV and Cinema has blurred sufficiently that it was considered a more appropriate approach to have just one Production Levy regardless of genre or distribution method.

Pact continues to offer a subsidised, flat rate of membership for film members (solely involved in productions intended for theatrical release), at £500 plus Vat, and will then charge the Pact Production Levy on any productions registered with us at the new rates from Friday 1^st April 2022.

There is no change to the current procedure.

Overseas productions registered after Friday 1^st April 2022 will pay the Pact Production Levy at the new rates.

The Pact Production Levy is designed to charge a fee on productions that are serviced by Pact but would not get captured in a company’s membership fee because they are run through an SPV rather than being reflected in the turnover of the member company.

It is usually applied only in the case of higher budget productions and largely only affects our member companies that are involved in high-end drama.

How the rate change will affect you is based on whether or not you use special purpose vehicles (SPVs) for your productions and whether or not the results of these SPVs are consolidated into your annual accounts:

No I do not use SPVs for my productions:

You will continue to pay your Pact membership fee on your annual renewal date, each year, based on your company turnover as per the last set of accounts filed at Companies House and will not be affected by the levy rate change.

The only time that you may be asked to pay a levy on a production that is being run through the parent company is if the production budget is significantly disproportionate to the turnover on which your membership fee is based.

A levy would be charged in this instance to ensure that the fees were collected at the point that the production was serviced. 

There would be no double counting of fees, as any levy paid would then be deducted off the future fee when the income from the production was included in the parents accounts.

For example:

Company A pays a membership fee of £1,120 on a turnover of £1m.

Company A later registers Production A with Pact that has a production budget of £20m.

Without the levy, Company A could utilise Pact's services for the production, and then when the turnover of Production A is included in Company A’s accounts, they may not be in a position to pay a fee on £20m turnover if, at that point they are not in production and cannot afford the higher fee.

If Pact had not charged a levy at the point of servicing the production, Pact would therefore have missed out on the fee, which would not be fair to all members.

Instead, under the levy structure, Company A would pay a levy on the £20m budget at the point it was in production.

Later when the income from Production A was included in the parent company accounts, the levy paid would be deducted off the calculated fee so that Company A paid a lower fee in that year.

Yes I do use SPVs for my productions:

In some instances, where productions are run through SPVs but the results are consolidated in annual parent’s accounts that can be provided to pact upon your membership renewal, and the levy payable is comparable to the annual membership fee you pay, there will be no need for you to be charged a Pact Production levy, and as such you will not be affected by the rate change.

However, in the majority of cases, companies that have a production being run through an SPV where the production budget is significantly disproportionate to the turnover that may be showing in the annual accounts will be asked to pay a Production Levy in order to ensure that fees are captured in advance of services being provided. This levy will then be deducted from future fees when the production income is included within the consolidated accounts in the future, in order to ensure there is no double-counting of fees.

Where productions run through an SPV are not consolidated into parent accounts, Members will be charged the Pact Production Levy as per the new rates for any productions registered with us from Friday 1^st April 2022.

Upon future renewal, members will be asked to provide copies of their parent accounts and accounts for all active SPVs (as per Companies House). These accounts will be added together to calculate the turnover figure upon which the member fee will be calculated, and any levy already paid in relation to the SPV will be deducted from the final fee, to ensure there is no double-counting.

The majority of our UK TV Levy paying members will see a decrease in the levy charged on the production and will also notice that there is now a cap on levy at £31,000 (previously this was at £84,000).

The Pact Production Levy is designed to charge a fee on productions that are serviced by Pact, but would not get captured in a company’s membership fee because they are run through an SPV rather than being reflected in the turnover of the member company.

Where a UK company runs a TV production though an SPV (usually to take advantage of the high-end TV tax credit) the parent company will be asked to join as a member of Pact and the Pact Production Levy is charged to ensure that fees are collected on the production that otherwise may not have been collected if the turnover of the SPV was not included on the parent accounts.

Considering that the levy provides access to Pact’s services just for the life of the production, rather than annual membership, the cap was put in place at £31,000. This is considered a reasonable maximum levy per production, especially for the overseas SVOD’s and Studios that register multiple productions a year with us.

However, to ensure that this is fair to all UK TV members that pay a membership fee on their annual turnover, a top-up membership fee will be calculated at the point of renewal in any instance where a budget has exceed the £50m cap.

For example:

Company B pays a levy of £31,000 on a production (Project B), with a budget of £56m.

Upon a future renewal, Company B provides either consolidated accounts that include production income from Project B, or individual accounts for its parent company and Project B which are added together. The total turnover as per these accounts is £62m.

Company B would therefore pay a membership fee at the rate relevant to turnover of £62m and the £31,000 levy already paid would be deducted from this so that they would only pay the balance.

This will therefore ensure that all Members are ultimately paying membership fees at the same rates, regardless of whether the production is run through an SPV or through the parent company accounts.

In order to support our members, we are open to having conversations on a case by case basis, regarding charging a levy on the whole budget (and then deducting this from any future membership fee at the point that the production income is included in the parent accounts) if this would suit a company’s financial arrangements.

For UK TV Levy only – where companies have already paid a TV levy at rates prior to Friday 1^st April 2022, the production income will be deducted from any future turnover calculation at the point that the income from the production is included in the member’s turnover at renewal, so that there will be no more fees to pay on the production.