The taxman giveth

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By Jesse Whittock 04-09-2012

Next year, the UK gets its first television production tax credit system. But producers must act now to make sure that it works for them, writes Jesse Whittock.

Thomas the Tank Engine

Nobody in the world likes doing tax returns. But if filling in that irritating form means the difference between your project going into production or not, it becomes a far more fulfilling experience.

The UK’s Treasury is moving ahead with its tax rebate system for animation, video games and high-end TV drama. These breaks, scheduled to come into force in April 2013, are set to be “among the most generous available anywhere,” according to Britain’s chancellor of the exchequer George Osborne, which could mean about 25% of UK spend per production.

There were more than a few partied-out indies nursing sore heads the day after that announcement in March, which came after long and arduous lobbying campaigns that had often looked doomed.

For animation producers, the need for help was obvious. Many of the UK’s most-loved children’s brands – Noddy, Thomas the Tank Engine and Bob the Builder, for example – had been taken overseas by investors who took advantage of an industry in crisis and firms in crippling recession-induced debt.

Thomas production company Hit Entertainment was swallowed by Californian toyco Mattel, while Chorion, Cosgrove Hall and Target Entertainment went out of business. The UK, once known as the most creative cartoon production hub in the world, was fast becoming the train wreck of the global children’s content community.

The case with drama wasn’t as clear-cut to outsiders. With ITV1′s Downton Abbey riding high and companies like Mammoth Screen, Carnival Films and Left Bank Pictures all producing top-notch series, all currently appears well. But the truth is different; much of the money generated from these big-hitting series goes elsewhere.

Also, UK drama prodcos increasingly head to foreign climes to shoot, taking advantage of local tax credits. Left Bank did so with its Sky1/Cinemax series Strike Back by using a South African setting, while others have gone to Belgium, Hungary and Canada, all of which provide great incentives. And better weather. Brits love a bit of sun.

Against that backdrop, it’s easier to understand why Downton scribe Julian Fellowes was among a chorus of voices joining producers like Aardman Animations, Astley Baker Davies and Kudos Film & TV in calling for state aid.

The new system will be based on the existing Film Tax Relief, a credit that accounts for up to 25% of British activity on qualifying feature films. According to the government, it has added an extra £1bn (US$1.56bn) to investment in UK films since its creation in 2007. Undeniably, it has provided buoyancy to the market and created confidence and jobs.

TV producers now have until September 10 to tell the Treasury what the system should look like, before the public consultation phase ends, and campaigners such as Oli Hyatt from Animation UK have urged execs to get their views in as soon as possible. Indeed, this is the one chance they get, so if anyone involved hasn’t done so yet, they should. It would be truly ludicrous if the much-needed legislation didn’t work because the government focused on the wrong elements. It’s down to the industry to act.

This is especially important for animation. Current projections suggest qualifying programmes will need to be 75% animated. As Hyatt pointed out at the Children’s Media Conference recently, this would rule out shows many consider to be animation, such as The Foundation’s preschool series Waybuloo, which is coproduced with Canada’s DHX Media. A more sensible requirement would be something like 51%.

Shows made under the new systems will also be subject to a ‘cultural’ test, which will subjectively (and absurdly) assess how British animated talking trains are, or whether Barnacles the polar bear captain of the ocean-exploring Octonauts is as English as Newcastle-born actor Simon Greenall, who voices the role.

But absurdity aside, there’s no denying how successful tax breaks have been for countries such as Canada and Ireland. US networks have looked north to cut production costs of primetime dramas (ABC’s Rookie Blue and NBC’s Saving Hope, for example), while Disney has made Ireland its European animation production partner of choice. Shows like Doc McStuffins and The Amazing World of Gumball have lifted the Emerald Isle’s toon houses to new heights internationally. Is the same effect heading to the UK?

So while the London Olympics has held the attention of the global community this summer, the British production sector has to stay focused on its goal. One last push could change UK production forever, bringing more international business and new confidence to the sector. Those annoying tax returns won’t seem nearly as bad anymore.