Patrick Irwin, Justin Thomson-Glover and Louisa Spring – the principals of London and LA-based exec-production, coproduction and financing consultancy Far Moor – discuss how the introduction of the UK TV tax credit should be used to benefit the business on both sides of the Pond.
The UK tax credit for high-end TV comedy and drama and animation has now all but passed into law in the UK and applies to UK expenditure post 1 April this year. HBO and Disney were intimately involved in the negotiations with the UK Treasury over the new law and so a television tax credit has emerged that is a lot broader than before, thus keeping shows like Game of Thrones in the UK.
With US networks’ audience shares declining, and the likes of Hulu, Amazon and Netflix increasing their footprint, it does feel as if the whole of the television industry is in transition with executives and producers very much thinking out of the box and openly talking about following non traditional forms of finance and production. With the new 25% UK television tax credit it is not surprising that there has been a flurry of interest in the UK.
UK cast continues to feature large in US TV shows so any production shot in the UK already has – along with the casts of Harry Potter, Pirates of the Carribean, The Lord of the Rings and The Hobbit – got on-screen talent that a US audience will recognise. If you factor in the pool of brilliant technicians in the UK, it is clear that pushing locations to the UK offers advantages.
Allied to this is the overall shift in the television landscape towards US productions that are majority financed from outside the US. In recent years these have been predominantly period event television shows such as Downton Abbey (below), The Borgias, The Tudors, Vikings and Call the Midwife with European writers such as Julian Fellowes, Neil Jordan and Michael Hirst bringing in huge rating for US broadcasters. However, there has been a further shift towards Europe with the success of Scandi dramas such as The Bridge, Rebound and The Killing demonstrating that there is a huge amount of talent and material that can be mined from Europe for a prospecting US television executive.
We see major opportunities with the introduction of the UK tax credit and it was a principal reason we recently opened a LA office to deal with the significant interest in filming and producing projects out of the UK. The US cable networks are now actively looking at their development slate with one eye on the opportunities afforded by the UK – this tax credit is very far reaching and even projects developed in the Hollywood Hills can fall under its remit.
However, the opportunities are not limited to big US studio miniseries and series and there are other interesting options. The first is the ability to gain access to UK broadcasters, who might, if it can be presented carefully with a UK company, be more inclined to fund an international show if UK talent and resources are being used.
The second is in some ways the most interesting. Using the UK as a place to develop and produce an international show opens up the possibility of rights retention for writers and producers and greater rewards if you can get European partners to co-develop and coproduce projects out of the UK. LA-based managers and agents are also very interested in making money for their clients by setting up shows in the UK and giving them an alternative to the US studio system.
So what would entice the television showrunner to the UK? Apart from our fine weather and beer (only one of which is generally warm), the new tax credit can give up to 25% cash benefit on up to 80% of qualifying costs. In theory this 80% rule was intended to encourage coproduction. That’s what happens when policy wonks get creative. There has to be a UK taxable entity to apply. This can be a UK service producer, or a special purpose company established in the UK for the production, which must be managed and controlled locally.
There’s also a £1 million (US$1.5 million) an hour threshold that must be crossed for the credit to kick in, quite a high bar for UK domestic production but not so great for US shows and the criterion is based on a slot-length hour. Clearly the HBOs and Disneys of this world can afford to cash flow tax credits themselves – payment time will likely be three to four months after application – but UK banks are gearing themselves up to offer to discount.
We are strong advocates of filming in the UK and think the tax credit will make it an extremely attractive option. But we recommend you should not just use the UK as an attractive tax benefit territory. We would also encourage executives to look at coproducing and co-developing projects with UK broadcasters and producers or even developing their own shows from scratch. Not everything will be plain sailing but the BBC and Sky are actively looking for coproduction partners and US talent to work with and at Far Moor we would be only too happy to point you in the right direction.