While the recently signed co production treaty between South Africa and the UK has generally been accepted as good news for the local film industry, according to Jane Corden, CEO of entertainment industry financial services provider, Moneypenny, the emerging details of the UK’s tax credit scheme has been met with some trepidation.
She says, “The co production treaty between the two countries is a 20:80 treaty, where at least 20% of funding must come from one of the countries and the balance from the other/s, and expenditure should be in line with the funding split of the film. There are a series of definitions which define UK and SA expenditure for the purpose of measuring spend under the treaty, for example cast and crew are considered spend in their home country wherever they perform the work.”
“The UK tax credit is worth 25% of the UK expenditure but may not exceed 20% of core expenditure on films with a core budget of less than GBP20m, and is 20% of the UK expenditure to a maximum of 16% of core expenditure on films where the core budget exceeds GBP20m. The new definition of UK spend for the tax credit is expenditure on production activity in the UK. Nationality is irrelevant for this so any SA personnel or cast working in the UK would qualify as UK spend and attract the UK tax credit. Core expenditure is after deducting development and distribution costs including financing costs.”
The tax credit is aimed at encouraging more production activity in the UK, and is generally regarded as a deterrent to using overseas studios and locations and to engage in co production. “However,” says Corden, “the important thing will be to see how the rules may be used to the advantage of a production, and how we may make sense within the guidelines of a production which must be shot in SA because of locations that cannot be found in the UK, or if the cost advantage can outweigh a reduced credit.”
One benefit of the new definition is that it may be considered an encouragement to take SA personnel to work in the UK, where they would then attract the tax credit, and in the process SA technicians and creatives could potentially receive valuable skill transfer opportunities.
Says Corden, “The interesting advantage in such a scenario is that this would allow a double dip, as such expenditure would also qualify for our own DTI rebate, which under an official co production is 25%.”
All up Corden believes the treaty will provide opportunity for South Africa, there is a great deal of interest from the Brits to work in South Africa and such productions will be advantaged by the existence of the treaty. UK financiers are busily reinventing themselves to find a path under the new UK tax credit scheme and South African financing tools can work well with the new guidelines to deliver the same percentage of a total budget as Sale and Lease Back did. South African film makers should ensure the reciprocity of this co production treaty, working to deliver South African conceived projects to the table so that this treaty does not simply see South Africa servicing UK production.
Co production as a whole represents significant opportunity for South African film makers to make their stories with bigger budgets and more access to international distribution. SA now has treaties with UK, Canada, Germany and Italy and are in process with France, India, Australia a€” see Aus/SA co pro luncheon in Cannes pictured. Opportunities with other African countries are also being explored.
