Film studios set for crisis talks over property tax that could “torpedo” UK status as Hollywood rival

Exclusive: Britain’s biggest film studios are preparing for crisis talks with a government agency amid fears a so-called “studio tax” could “torpedo” the UK’s booming production industry.

Pinewood is among an informal task force of UK studios working with the British Film Commission (BFC) to avoid a potentially huge increase in property tax. Representatives from the studios are due to meet with the Valuation Office Agency (VOA) this week to set out their concerns.

VOA has retrieved the “rateable value” of studios in the UK, an assessment of the amount a property would fetch for rent if it were available on the open market. Rateable values ​​are used to calculate the business rate, a tax on non-domestic property. The higher the rateable value, the higher the business rate.

Pinewood Studios’ rateable value will quadruple from £3.95M to £16.2M ($19.7M) under a valuation introduced by VOA in April. Warner Bros. Studios Leavesden, home batman And Netflix’s youIt will see its net worth rocket fivefold to £25.3M.

Smaller studios are experiencing similar growth Arborfield, where Netflix the witch Filmed, the rateable value is set at £2.9M, more than seven times the existing valuation. Twickenham Film Studios’ lettable value is set to quadruple to £1.75M.

The changes have disappointed studio heads and developers, who believe it would be a spectacular own goal for the UK government, which has worked to boost a thriving £6.3B manufacturing sector through tax breaks and efficiency investment.

There are concerns that higher business rates will be passed on to producers, making the UK a less competitive location to set up film and TV projects. Industry insiders say higher property taxes will threaten investment in new facilities while studio space is at a premium.

There’s a view that business rate hikes couldn’t come at a worse time, as studios grapple with eye-watering energy costs. There are also concerns that demand for studio space may remain high, as streamers like Netflix grip costs amid sputtering subscriber growth.

Suprana Shetty, Joint Managing Director of Twickenham Film Studios, where Bohemian Rhapsody was filmed, said: “VOA has thrown a grenade at the film industry. As far as we can tell it could be the death knell for a number of the UK’s most historic independent film studios.”

Barnaby Thompson, a partner at Ealing Studios, said the facility would have to rethink plans to build a new 14,000-square-foot sound stage if the studios weren’t forced to reconsider. at home Darkest Hour And Last night in SohoEaling Studios’ rateable value will more than double to £2.8M

“The UK has done so well with its creative industries, why do anything to threaten the progress you’ve made?” Thompson said. “I’m hoping that it’s a misunderstanding in terms of how the studios operate and that once they start talking to people who know the business, they’ll realize that the rate calculations are wrong.”

Nick Smith, managing director of Sheenfield Studios, a Reading-based complex which opened the first of its 18 stages last year, said: “Rise increases which then need to be passed, because the studios don’t really do that much money, break some of the business and production. Going to I would encourage the Valuation Office to look at the rates again. You might be able to double the rate for a UK studio, but what’s the cost of the production you’re going to lose?

Ryan Dean, founder of RD Studios in west London, agrees that this is “short-term” thinking. He said, “Someone in a senior position in the government should look into this. “What’s the point of investing all this time, energy and money into something that’s working and torpedoing post-Brexit?”

It’s unclear how VOA calculated the increase in rateable value, but speculation among studio chiefs is that it was based on revenue generated by major studios from long-term leases, such as Disney’s decade-long deal with Pinewood. The majority of UK studio clients are not locked into similar contracts. Instead, they license their sound stages on a production-by-production basis, meaning they have a fallback period.

Pinewood, home of James Bond No Time to Die, and Warner Bros. Studios Leavesden are among the legacy studios that will have some protection from rateable value increases as their business rate will be capped at 30%. It’s unclear, however, if Pinewood’s contract includes a provision to pay Disney a higher business rate, meaning it may have to absorb the cost. Pinewood and Warner Bros. declined to comment.

Studios operating after March 31 this year will not be protected by the 30% cap, which could jeopardize construction projects. Two developers joined the chorus of concern. Mark Quinn, who is behind the £250M Ashford International Studios, which starts construction in Kent later this year, said the rateable standards were “a retrograde step for investment in Britain’s film industry.”

Giles Dobson, partner at property consultancy Bidwells, which developed Hartswood Studios in Hertfordshire, added: “UK property tax rises are threatening to destroy Britain’s position as a global center for the entertainment industry … A huge supply and demand mismatch has left multinational manufacturing giants competing for limited space, so The government should have the ambition to encourage new studio development, not discourage it with new taxes.”

VOA was the first to publish rateable pricing to allow the film and TV industry to make presentations. It calculates valuations using methods approved by the Royal Institution of Chartered Surveyors.

A VOA spokesman said: “The new rateable value of a film or TV studio will reflect changes in rental rates between 2015 and 2021. Since 2015, the growth of streaming services and the attraction of productions in the UK has led to an increase in rental prices. We are discussing the assessment with industry representatives.”

BFC Chief Executive Adrian Wootton said: “Following the publication of the Valuation Office agency’s draft Non-Domestic Rate Revaluation List, the British Film Commission has been actively engaged in working with business rates experts, the studio sector and government. Details and implications to support a satisfactory outcome for all parties. To this end, a meeting has now been held between VOA and representatives of business rates from the studios.”

The studio tax issue comes as the government contemplates a major shake-up of the UK’s film and TV tax credit system, which is causing widespread concern in the industry. A consultation on filming incentives closed last week, with the government considering raising the threshold at which producers can claim tax relief beyond the current level of £1M an hour.

The BBC, ITV, Channel 4, Sky, Paramount and Netflix were among industry leaders who wrote to the government to warn that raising the threshold would lead to fewer productions being set up in the UK. They said it would put £1.3B of tax revenue and 30,000 jobs at risk.