Euro Production Incentives: U.K.

PREMIUM: Kicking off a series on the incentives enticing companies to film their dramas in Europe, Jay Stuart takes a close look at the opportunities created by the U.K.’s ambitious tax-relief scheme for scripted television projects that came into effect in 2013.

The scheme covers projects with a minimum core expenditure of £1 million (€1.2 million) per broadcast hour, with a rebate of up to 25 percent of qualifying expenditure. Unlike in many other places, there is no cap on the amount that can be claimed. A minimum of 25 percent of costs must be spent on U.K. qualifying production expenditure.

The tax relief is available for “culturally high-end TV programs.” The British government has said the new regime is expected to have a “significant impact” on businesses producing such shows, with about 50 high-end television production companies in the country that may benefit from the relief.

The government has estimated that the amount of support could reach £70 million (€86 million) by 2017–18. That figure is the amount of tax revenue that would not be coming to the Exchequer. For 2013–14, the estimate was £5 million (€6.1 million), forecast to climb to £25 million (€30.7 million) this year, £45 million (€55.3 million) next year and £60 million (€73.7 million) in 2016–17, if the program works as effectively as hoped.

“The incentives are an excellent idea,” says Jonathan Berger, a partner specializing in production finance at law firm Harbottle & Lewis. “They apply to both indigenous and inward production. They will not mean more domestic production in terms of volume, but they will mean bigger productions and higher production values. There is enormous interest from Hollywood in the U.K. TV incentives. Everybody thinks we have great incentives.”

“We were seeing an increasing volume of production leaving the U.K.,” says Oliver Lang, who steers the financial side of production as controller of content investment at BBC Worldwide. “In order to produce high-end drama and get scale, they were going to Eastern Europe and the Czech Republic, for example. Now, with the tax incentives, the U.K. is very competitive. We are seeing people staying. We are also seeing people coming with productions like Da Vinci’s Demons.”

BBC Worldwide Productions has produced the show in Wales for Starz in the U.S. and FOX International Channels with Phantom Four Films and Adjacent Productions.

“Any producer looking at high-end drama is going to be looking at tax incentives,” Lang says. “So, many places are offering them. The tax incentives put the U.K. on an even keel with other territories. Given other factors, such as the depth of the skills available and the disproportionate strength of our independent production sector, the U.K. is now in an advantageous position.”

Lang continues: “It still feels like relatively early days for the U.K. tax credit. One thing I have noticed is that additional money coming into production through the tax credit is going to increase the scale and ambition of productions, not drive up producers’ margins.”

“The U.K. tax incentives for television have certainly made us more attractive as a partner,” says Susan Waddell, the CEO of Power, which co-produced the series New Worlds with all3media subsidiary Company Pictures in association with the U.K.’s Channel 4. The show was shot in the U.K. and Romania. “The number of people getting in touch with us about potential projects has increased noticeably over the last year or so. Everyone is looking at how to structure productions and co-productions to maximize incentives. The new tax incentives in the U.K. are the first and last consideration in what we do, though of course the evaluation of any project needs to tick the right creative boxes.”

Attracting television production from North America is not just a matter of offering incentives, acknowledges Berger of Harbottle & Lewis. “There are some issues for the U.K. to wrestle with. The first one that comes to mind is studio space. If you look at the traditional U.S. model of doing [22 to 24] episodes over five or six seasons, you need to know that you can commit to going someplace that can handle that. The U.K. studios are not really able to accommodate that yet. I don’t think it will be a long-term problem, and things are being done to remedy it.

“Another issue is the strong pound. The incentives are helping to offset the pound at $1.68. If the dollar moves to $1.40, the incentives will mean such a savings that Americans might even want to build studio space themselves. People like shooting here. We have good crews and it’s a good place to work. It’s all a question of cost.”