Film Financing and Television Programming | KPMG | US

United Kingdom, Film Financing and Television Programming: A Taxation Guide

Film Financing and Television Programming


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The U.K. film industry enjoys a first-rate reputation, enhanced recently by international critical and commercial successes with Skyfall, Gravity, and Rush, being three of many to entrance global audiences.
Filmmakers are generally attracted to the United Kingdom for three main reasons:

  1. The high-quality studio, laboratory, and post-production facilities
  2. Talented performers, experienced, professional crew, and industry-leading digital effects and sound specialists; and
  3. The beneficial tax incentives available.

The United Kingdom is the third largest film market1 in the world and the industry makes a substantial contribution to the country’s economy. In 2012, the film and video industries employed over 70,000 people, up by almost 20,000 since 2009. This has been helped by Warner Brothers™ making Leavesden Studios (near London) their European Film base.
Inward film investment into the United Kingdom has fallen since 2011, but this has not halted production of some of the most successful films of recent years taking place here— multiple Oscar winner 12 Years a Slave, A Good Day to Die Hard, and Les Miserables were all shot in the United Kingdom The latest instalment of the Star Wars franchise, Episode VII, is being filmed to great anticipation, along with Alice in Wonderland: Through the Looking Glass and the sequel to Guardians of the Galaxy.
Factors contributing to this decrease may be the strong pound, which has reduced the United Kingdom’s cost effectiveness as a location for film production, but the generous U.K. film tax incentives (as described later in this chapter) encourage production companies to return to the U.K. year-on-year. New digital acquisition methods and distribution methods (such as the use of mobile- and Internet-based technologies) prevalent in the U.K. make it easier to shoot and screen films—this, coupled with market-leading digital effects and sound specialists, makes the U.K. film industry a leading market for film production talent.
Encouragingly, the value of domestic production has risen recently, reflecting easing economic conditions within the United Kingdom and an ever-expanding market available to the thriving independent U.K. production sector. The British Film Institute (BFI) London Film Festival attracts thousands of visitors every year, along with many stars of the silver-screen, and opens up the U.K. film industry globally.
1 Source: British Film Institute Statistical Yearbook for 2013 -

The BFI was established to promote a competitive, successful, and vibrant U.K. film industry, and to promote the widest possible enjoyment and understanding of cinema throughout the United Kingdom The BFI helps to determine that the United Kingdom’s economic, cultural, and educational aspects of film are represented throughout the UK and that National Lottery funding is effectively distributed for the development and production of new British films, along with audience development activity through supporting film distribution and exhibition. The BFI also takes responsibility for the certification of U.K. films (which enables filmmakers to access the U.K. film tax relief for film production). Responsibility for inward investment has been transferred to Film London, which is funded by the BFI. 

Television and the Impact of the Move to Digital

The U.K. television industry has enjoyed a boom in recent years, both domestically and abroad, with foreign sales of U.K. programmes having increased 16% in the past three years, up to £1.7bn. This has been driven by the success of such programmes as Sherlock, Downton Abbey (both Emmy and Golden Globe award winners), and Doctor Who, as well as perennial favourites such as Top Gear, The X Factor, and The Office

The television market has shifted from traditional broadcast services, pay TV services, and traditional DVDs towards video-on-demand, free catch-up TV, and live video streaming online. Services such as Netflix, Amazon Prime/LoveFilm, and NowTV have led this expansion and movement away from traditional viewing habits, via mobile and broadband connections through an expanding range of platforms and devices, allowing consumers to watch what they want, when they want.
Responding to consumer demand, subscription video-on-demand (SVOD) services have been the most successful of the online VOD business models, and this is forecast to continue expanding to meet consumer demand to watch what they want, when they want to. The U.K. market for SVOD was competitive in 2013, and recent improvements and developments by the major providers should foster an increased number of film and TV titles being made available to consumers via the Internet.
Domestic content providers are enhancing their online digital content quickly to adapt to and develop with the changing market. For example, the BBC have moved the BBC Three channel to an entirely online offering. Furthermore, in 2007, BBC launched the BBC iPlayer as a way for U.K. consumers to take advantage of new forms of online programme distribution. It is a free-to-view catch-up Internet TV service that became a rapid success, enabling consumers with connected devices and screens to request BBC TV programmes to view on an online catch-up basis. In the past three years, there has been an increase of over 98% in requests to view BBC programmes via the iPlayer service, rising to over 2.2 billion. The commercial public service broadcasters (ITV1, Channel 4, and Channel 5) also provide their own catch-up Internet TV services on connected devices and platforms to U.K. consumers2.

Consumers are able to view on a catch-up basis TV programmes they missed on ITV1, Channel 4, and Channel 5 from the previous 30 days. Some BBC, ITV1, Channel 4, and Channel 5 TV content, such as films, music, and sporting events are not available to watch via catch-up TV because of rights issues. 

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