Rags to riches: Disney earns £170m in tax breaks as UK film industry grows

Disney has been handed nearly £170m by the UK taxman in return for agreeing to make films in Britain, according to an analysis of company accounts. Disney is increasingly filming on this side of the Atlantic rather than closer to home in California. This year alone it is using the UK as a base for Kenneth Branagh’s live-action remake of Cinderella (left), the next instalment in the Star Wars series, and Avengers: Age of Ultron.

The attraction of the UK is not just a ready supply of skilled staff, but the government’s film tax credit scheme, which entitles movies with expenditure of more than £20m to claim back up to 20% of their production costs.

The first analysis of accounts for the Disney movies made in the UK reveals that since the scheme was introduced in 2007 the company has benefited from HMRC to the tune of £167.6m. Last year the tax credits reached a high of £50.1m, believed to be the largest ever payment to a studio. A third of that was awarded to the blockbuster Thor: The Dark World, which was filmed at Pinewood Studios in Buckinghamshire.

To qualify for the tax relief, 70% of a film’s labour costs must be paid to European workers and at least 25% of the production costs spent in the UK.

Jonathan Isaby, chief executive of the Taxpayers’ Alliance, said: “Fiddly little favours for special interests are why we have such a terribly complicated tax system and it’s why ordinary taxpayers no longer trust that everyone is paying their fair share. Exemptions and reliefs like this should be scrapped altogether, and we should then cut the rates for everyone to attract investment and boost growth. It’s not up to politicians to pick winners through the tax system, so radical reform is a must for the next government.”

Since 2007 Disney has spent a total of £1.4bn on film-making in the UK. This includes the £240m costs of the fourth Pirates of the Caribbean film, believed to be the most expensive in history. It grossed more than £641m, according to industry analyst Box Office Mojo. Last year Disney’s UK film costs peaked at £328m, around 18% of the £1.9bn ($3bn) that the studio spent worldwide. The UK’s share was up from 11% in 2012.

Accounts released this year show that Disney has already spent more than £111m on the Star Wars and Avengers films alone.

Other studios are also filming more in the UK. Warner Bros currently has three movies in production here, including one based on the 1960s television series The Man From Uncle, directed by Guy Ritchie.

But some complain the tax relief can backfire as a boost to the British film industry. In November Edgar Wright, the director of British movies Hot Fuzz and The World’s End, said: “While the tax break is good for Hollywood films shooting here, it’s probably not that great for British films shooting in the UK. Some middle-to-low-budget films are going to find themselves without crew because all the American films are shooting here.”