The unintended consequence of TV drama tax breaks

By Russell Rich

Tax breaks for the most expensive film and television productions have turned the UK into a utopia for huge budget productions. That must be a good thing for everyone – right? Well no, wrong actually.

As media accountants in London, we are noticing that there’s a strange glitch. While the tax breaks for high-end films and TV productions made in the UK (introduced last year by the government) have helped to attract many more and bigger productions to our shores, the knock-on effect is that the availability of support services for crew, such as trained electricians, is now severely limited.

Increased demand for staff, studios and resources is a real anxiety among producers. Everyone in the industry is scrambling around the same pool of UK talent, of which there are now not enough, as it has become so much more tax effective to work here.  This has also led to rate inflation as there is more competition for talent when assembling crews. It’s the old supply and demand story.

In many respects, this is a good problem to have and is encouraging an increased number of production companies to bring their work to the UK. The tax breaks have been massively helpful to both the production business and the UK economy as a whole. According to the British Film Institute, the government’s expenditure on creative tax relief for TV has generated a more than eight-fold return: for each £1 spent on high-end TV, tax relief has returned £8.31 to the UK economy.

Media accountants like us will tell you that tax breaks have benefitted the more high-end productions but the money is tending to stay at the top and is not being deployed to help smaller productions and other (e.g. factual) genres. Some in the industry are now lobbying to lower the threshold (currently 20% relief for dramas costing £1m or more per hour – so £1m per hour spent repays £200,000 to the production) for factual productions so that more can benefit from tax breaks. This will require careful thought as the idea behind the tax break is to create high-end dramas that have a commercial, export value.

The tax relief has apparently acquired the nickname of the “Downton Abbey tax credit” because Downton is the biggest and most successful drama export Britain has ever had. The tax break was created with the intention to create more shows with that sort of appeal and not present the unintended consequence of causing problems at the grass roots of the industry.

To discuss any of these issues, or to find out more about our work as media accountants, please do email me or call on 020 7490 7766.

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