Film studios brace for crunch property tax talks that could boost Britain’s status as a Hollywood contender

EXCLUSIVE: Britain’s biggest film studios are preparing for talks with a government agency over fears that a so-called ‘studio tax’ could ‘torpedo’ Britain’s booming production industry.

Pinewood is part of an informal taskforce of UK studios working with the British Film Commission (BFC) to prevent potentially massive property tax increases. Studio officials have a meeting with the Bureau of Valuation (VOA) this week to express their concerns.

The VOA reworded the ‘tax values’ of studios in the UK, an estimate of how much a property would rent if it were available on the open market. Cadastral values ​​are used to calculate business tax, a tax on non-domestic property. The higher the taxable value, the higher the trade tax rate.

Pinewood Studios’ rateable value will quadruple from £3.95m to £16.2m ($19.7m) according to estimates to be launched by the VOA in April. Warner Bros. Studios Leavesden, home of The dough and that of Netflix Youthe rateable value will increase fivefold to £25.3 million.

Smaller studios face similar hikes. Arborfield, where Netflix is The Witcher was filmed, fetched a rateable value of £2.9 million, more than seven times the existing valuation. Twickenham Film Studios’ rateable value is set to quadruple to £1.75m.

The changes have upset studio bosses and developers, who believe it will be a spectacular own goal for the UK government, which has worked to encourage growth in a booming £6.3bn manufacturing sector through tax breaks and investment in skills.

There are concerns that higher business rates will have to be passed on to producers, making the UK a less competitive place to launch film and television projects. Industry insiders said higher property taxes would also threaten investment in new facilities at a time when studio space is expensive.

There is sentiment that corporate rate hikes could not come at a worse time as studios grapple with staggering energy bills. There are also concerns that demand for studio space has peaked as streamers like Netflix rein in spending amid surging subscriber growth.

Barnaby Thompson, a partner at Ealing Studios, said the facility would have to reconsider plans to build a new 14,000 sq ft sound stage if the studios did not force a rethink. At home with darkest hour And Last night in Sohowill more than double the rateable value of Ealing Studios to £2.8m.

“Britain has done such a good job with its creative industries, why would you do anything to jeopardize the progress you have made?” Thompson said. “I hope there is a misunderstanding of how studios work and once they start talking to people familiar with the company, they will find that the rate calculations are inaccurate.”

Nick Smith, chief executive of Shinfield Studios, a Reading complex which opened the first of its 18 stages last year, said: “To introduce a price increase which then has to be passed on because studios don’t actually make that much money , will be difficult. for some companies and break productions. I would encourage the rating agency to look at the prices again. You might be able to double the prices for a British studio, but what is the value of the production you will lose? ”

Ryan Dean, founder of RD Studios in west London, agreed it was “short-term thinking”. “Someone in a higher government position should take care of that,” he said. “What’s the point of investing all that time, energy and money into something that will work after Brexit and torpedoing it?”

It is unclear how the VOA calculated the increase in tax values, but there is speculation among studio executives that it is based on the income that major studios generate from long-term leases, such as from rent. B. Disney’s decade-long contract with Pinewood. Most studios in the UK do not have clients bound by similar arrangements. Instead, they license their soundstages per production, which means they have downtime.

Pinewood, home of James Bond No time to die, and Warner Bros. Studios Leavesden are among the legacy studios that receive some protection against taxable capital gains, as their business tax rates are capped at 30%. However, it is not clear whether Pinewood included a provision in his contract to pass on higher corporate rates to Disney, meaning he may have to foot the bill. Pinewood and Warner Bros. declined to comment.

Studios operating after March 31 this year will not be protected by the 30% cap, which could put construction projects at risk. Two developers have joined the chorus of concern. Mark Quinn, who is behind the £250m Ashford International Studios, construction of which is due to start in Kent later this year, said the rateable values ​​represented a “regressive step for investment in the UK film industry”.

Giles Dobson, partner at property consultancy Bidwells, which is developing Hertswood Studios in Hertfordshire, added: “British property tax rises threaten to dethrone Britain’s position as a global hub for the entertainment industry… Massive supply-demand mismatches have led to multinationals manufacturing giants are competing for limited space, so the government should have the ambition to encourage new studio developments and not discourage them like the new tax.

The VOA published the tax values ​​early to allow the film and television industry to make statements. It calculates ratings using methods approved by the Royal Institution of Chartered Surveyors.

A VOA spokesperson said: “The new rateable value of a film or television studio reflects changes in rental values ​​from 2015 to 2021. Since 2015, the growth of streaming services and the appeal of production in the UK has led to an increase in rental values. We are in discussion with industry representatives about the ratings.”

Adrian Wootton, chief executive of the BFC said: “Following the publication of the draft non-domestic revaluation list by the Valuation Office Agency, the British Film Commission is actively working with corporate pricing specialists, the studio sector and government to identify the details and implications for a satisfactory support an outcome for all parties. Discussions have now taken place between the VOA and the studios’ business rate representatives.”

The studio tax issue comes as the government considers a wider review of the UK’s film and television tax credit system, raising concerns in the industry. A consultation on film incentives closed last week, with the government considering raising the threshold above which producers can claim tax relief from 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 result in fewer productions being hosted in the UK. They said it would put £1.3bn of tax revenue and 30,000 jobs at risk.