The UK tax authority His Majesty’s Revenue and Customs (HMRC) has confirmed it is putting extra resource in place to lend a hand redress issues su
The UK tax authority His Majesty’s Revenue and Customs (HMRC) has confirmed it is putting extra resource in place to lend a hand redress issues surrounding delays in value-added tax (VAT) repayments, which have thrown some UK projects into disarray.
An HMRC spokesperson told Screen: “We are experiencing delays with some VAT refunds and are putting extra resource in place to address it.”
Over the past year, producers and production accountants have noted a slowdown in turnaround on VAT repayments, taking up to six months to be repaid. Repayments are usually expected to be approved within 30 days.
VAT is a tax added to most products and services, of which the current standard rate is 20% in the UK. VAT-registered businesses can claim back VAT spent on goods and services used wholly for business purposes. In the case of film production, this can include camera suppliers, crew, caterers and locations.
VAT repayments form a significant part of the cashflow for smaller independent UK productions. Producers with whom Screen has spoken, who asked to remain anonymous, said the sluggishness of the VAT repayments has been “causing havoc” and is “crippling for the business”.
As well as budget issues, producers say they are facing reputational damage as they are unable to pay suppliers. Many have been out of pocket by hundreds of thousands of pounds, with one producer on a moderately-budgeted indie feature saying the project was left with a gap of £1m.
“You accept that when you set up a new company and file a huge VAT reclaim, they [HMRC] are going to, and they should, investigate it,” said one veteran UK producer, who waited around four months for a repayment earlier this year. “On an independent movie, when your cashflow is tight, that’s a big problem.”
The level of questioning from HMRC “feels a bit different” to dealings in the past, noted the producer. “There feels like a more industry-wide scrutiny of film.”
Screen understands there has been an enhance in the number of VAT repayment claims submitted to HMRC in all industries and not specific to film production companies, which could account for the delays in the process.
Producers believe that more education within HMRC is needed to lend a hand make the process more competent, as they find themselves explaining to HMRC representatives the often elaborate process of piecing together a film.
”It’s demanding work making a movie anyway, and it’s doubly tough when you’ve got to do filmmaking 101 to someone,” said a producer. “The people we were dealing with were trying their best, it’s just they didn’t understand it.”
“It’s basic stuff, like what does a director do, what does a producer do,” noted another producer, who waited six months for a repayment. “Lots of businesses would have gone into administration by now.”
“[HMRC] need a specialised film unit who knows how film works,” said a production accountant. “They need to talk to production guilds and the BFI and have a good knowledge of the industry.”
As a result of the cashflow issues from the delays in repayment, some producers and their suppliers have then been unable to pay future VAT bills, which mean they have incurred fines, and are having to raise a claim to get this money back.
HMRC declined to comment on Screen’s questions on whether there is a specific ongoing investigation into film production companies within HMRC, or if a change in personnel handling film VAT repayments has contributed to delays and a change in the tone of the relationship between HMRC officials and producers.
“They are wasting public money,” added the production accountant. “Under the terms and conditions of VAT, they have to pay the amount plus interest that’s been incurred for the late payment.”
“I’ve been doing this for 20 years, it’s harder than ever to make independent movies,” sighed one producer. “It’s fantastic they’ve increased the [independent film] tax credit, that’s amazing. It’s sort of counterproductive if another part of the revenue is going to be quite difficult.”
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