In a further bid to support the UK's creative industries, the chancellor has announced further amendments to the UK film tax relief regime designed to give greater tax incentives on film production expenditure.

The Government first introduced UK film tax reliefs in 2007 and plans to enhance the regime in Finance Bill 2014. These latest measures follow the introduction of a tax credit system for high-end TV productions, animation and video games in April 2013. The key proposals in Finance Bill 2014 (which will become effective for films whose principal photography is not completed before a specified date, which will be on or after 1 April 2014) are:

  • to increase relief from 20% to 25% on the first £20m of qualifying production expenditure and 20% thereafter for small and large budget films
  • to 'modernise' the existing cultural test which currently ensures only British films which meet strict specific requirements will qualify for the relief. This test will be widened to include European culture films and increase the chance of visual effects, special effects and principal photography expenditure qualifying for the film tax relief
  • to entice overseas companies locating certain functions within the UK by reducing the minimum UK expenditure requirement as a percentage of the project as a whole from 25% to 10%.

The Government has also pledged to invest £5m into the National Film & Television School's Digital Village. The plan is to expand and upgrade its existing facility into a world- class training centre in an attempt to help sustain a supply of UK talent for the digital and creative industries.

These amendments to the existing regime are subject to state aid approval but are expected to be introduced in Finance Bill 2014. The Government has also stated that it intends to seek state aid clearance to increase the rate of relief to 25% for all qualifying expenditure when it renotifies film tax relief in 2015.

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