Between 1 – 10 May, locations across the UK will be awash with the sights and sounds of South Asian cinema with one of the nation’s largest film festivals, Tongues on Fire.
In the lead up to this, one of the event key partners, Macalvins Chartered Accountants, is bringing attention to the incredible creative tax incentives for overseas film productions.
Having worked on a number of leading Bollywood and films from South East Asia, the London-based firm is ideally positioned to provide guidance to producers and directors looking to film and produce parts or all of their next title in the UK.
Muntazir Bhimji, a Partner and expert in the finances of the film industry from Macalvins, said: “The UK has a rich history of working with film productions in South Asia and so it is only right that the people and production companies behind these films make use of the wide variety of tax incentives available.
“The financing of a film can often be the difference between its eventual success or failure, so seeking out professional guidance can be invaluable, to both large and smaller films.”
The UK’s creative tax incentives
A new generation of incentives makes Britain one of the world’s most rewarding destinations for Indian and South Asian filmmakers
From independent Bollywood productions to major UK–India co-productions, the Government has fundamentally reshaped its film tax incentive landscape and the timing could not be better for South Asian storytellers looking to access one of the world’s most sophisticated production ecosystems.
Let’s explore some of the incentives currently on offer to filmmakers in the UK:
Audio-Visual Expenditure Credit (AVEC) – This is the core UK film incentive, replacing Film Tax Relief from January 2024. It applies to all qualifying British productions, with only 10 per cent of spend required to be UK-based. It offers a gross credit of 34% on qualifying UK expenditure, equivalent to a net rate of approximately 25.5% after Corporation Tax for films and high-end TV.
Enhanced AVEC: Independent Film Tax Credit (IFTC) – A new landmark tax credit for lower-budget films providing a taxable credit of up to 53% on qualifying core expenditure up to £15 million (for productions with total budgets up to £23.5m), capped at a maximum payable credit of £6.36 million. The film must have started principal photography on or after 1 April 2024. To be eligible, the film must be certified by the BFI and intended for theatrical release.
Enhanced VFX Credit – UK visual effects costs now attract an elevated rate of tax relief, with the 80% qualifying expenditure cap removed entirely for VFX, which is a major advantage for high-production-value productions. This provides a tax credit of up to 39 per cent, which works out as a net rate on expenditure of 29.25 per cent.
Film studio business rates relief – The UK operates a 40 per cent reduction in business rates for eligible UK film studios in England, backdated to April 2024 and available for 10 years, which helps keep studio hire costs competitive for international productions.
South Asian productions need spend as little as 10% of their budget in the UK to qualify for these reliefs, which means a production shooting primarily in India can still access the UK rebate through UK-based post-production, VFX, or partial principal photography.
The two routes to qualification
To qualify for these reliefs, beyond the points covered above, there is typically two approaches:
Route A BFI cultural test
This is a points-based assessment, which requires 18 out of 35 points to be met. South Asian productions can score through UK/EEA settings, British South Asian characters and stories, UK filming locations and diversity of on- and off-screen talent.
Route B UK–India co-production treaty – In place since 2008, this bilateral treaty allows qualifying UK–India co-productions to access UK tax credits automatically, without needing to pass the cultural test. Finance must be split proportionally between the two countries, requiring minority partner contribution of at least 20%.
Getting started
Here is a quick guide to how production companies can access UK creative tax credits:
- Incorporate a UK Film Production Company (FPC) as early as possible in the production process.
- Decide your qualification route – BFI cultural test or UK–India co-production treaty.
- Apply for interim BFI certification at earliest opportunity as timelines are typically six to eight weeks for this process, but can take longer.
- Ensure at least 10 per cent of core expenditure qualifies as UK spend.
- Submit your AVEC or IFTC claim to HMRC via Corporation Tax return once certified.
Why financial planning is critical for a film’s success
Having the funding in place and the tax incentives to free up cash to do more is only part of the film making process.
Whilst many people focus on how the director frames a shot and actors bring the story to life many fail to appreciate the importance of managing a film’s finances.
Hollywood and Bollywood are awash with films that never made it off the ground or were completed because the money ran out.
Even some of the greatest directors ever, like Stanley Kubrick, had projects pulled due to budgetary constraints.
Tax credits, co-production treaties, BFI certification, corporation tax structures, currency considerations and cross-border contracts do not exist in isolation.
They interact with one another and how you structure your production company, budget and document your costs from day one. This will directly determine how much financial support you ultimately receive back.
There are several potential risks including:
- Missing the qualification threshold
- Late BFI certification
- The wrong corporate structure
- Leaving money on the table
Muntazir explains: “A tax credit that is not properly claimed is not a tax credit. For international productions, early specialist advice is not a cost, it should be part of the budget.”
How a specialist film accountant helps
Here are the key areas that we typically support productions with:
- Structuring the production company correctly from day one – A specialist accountant ensures the UK FPC (Film Production Company) is incorporated at the right time, with the right structure, to maximise eligibility for AVEC, the IFTC, and any applicable co-production treaty benefits.
- Budgeting to maximise qualifying UK expenditure – Specialist accountants identify which costs qualify as UK core expenditure and help allocate spend —across locations, crew, post-production and VFX to meet or exceed thresholds and unlock the highest available credit rate.
- Preparing the BFI cultural test or co-production application – The statutory accountant’s report required by the BFI must be completed by a qualified professional. A specialist will also advise on how to score points across the cultural test’s content, location, and crew sections.
- Managing interim and final claims through production – Productions can claim AVEC on an interim basis while still shooting. A specialist accountant tracks qualifying costs in real time, prepares interim claims to support cash flow, and files the final claim once the BFI issues a completion certificate.
- Navigating cross-border tax obligations – For UK–India co-productions, dual tax obligations arise in both jurisdictions. A specialist with cross-border experience ensures compliance in both markets and helps structure finance to avoid double taxation on the same income.
- Stacking incentives with other sources of finance – UK tax credits can be combined with BFI Filmmaking Fund support, the UK Global Screen Fund, gap financing and Indian state incentives.
An experienced accountant maps the full picture and ensures claims are structured to complement each funding stream.
Here to help
If you want to explore UK tax credits or want help managing the funding of your next film, Macalvins Chartered Accountants – proud supporters of Tongues on Fire – would be happy to help you.
Speak to Muntazir Bhimji by emailing Muntazir@macalvins.com or calling 020 8863 1234. Visit Our website www.macalvins.com