Government & Industry support

This Guide for the Production Community was originally published on 31 March 2020 but has since been updated to include latest guidance from government and the film and television industries.  This information is correct as of 22 April 2020.

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The past six weeks have been an extraordinary time for the world, and the film and television industries have been hit, like most other industries, by the devastating impact of Covid-19.

As we all continue adjusting to a new reality, we are seeing that the issues unfolding are significant and complex. We hope that this detailed Guide for the Production Community covers all of the matters that you may be concerned about.

COMPANY SUPPORT

GOVERNMENT SUPPORT FOR PAYE STAFF 

1.  Statutory Sick Pay (SSP) (Updated on 22 April 2020): Legislation is being passed for SSP to be paid from day one of absence (rather than day four) if a member of Staff is absent from work or needs to stay at home due to COVID-19. This will apply retrospectively from 13 March 2020. SSP is currently £94.25 per week for up to 28 weeks. Employers will need to check that Staff are eligible for SSP. The Staff member should where applicable obtain an isolation note from NHS 111, which replaces the need for a sick note in relation to COVID-19. Employers with fewer than 250 employees will be able to reclaim costs of SSP for sickness absence due to COVID-19 – this refund will cover up to 2 weeks’ SSP per eligible employee. An employee cannot be both on sick-pay and furloughed.

2.  Furloughed Workers (the Job Retention Scheme) (Updated on 22 April 2020): This is an option available to employers which allows the employer to claim 80% of an employee’s wage for all employment costs up to a cap of £2,500 per month (for a minimum of three consecutive weeks and for up to four months at present). This covers salary, employer national insurance and minimum auto-enrolment employer pension contribution (3%). Employees remain employed, though not working (they must not do any work at all), while furloughed. It is up to the employer as to whether the difference between the claimed payment and the employee’s usual salary is paid. The scheme is due to run for four months from 1 March 2020.

Employees on fixed term contracts can be furloughed.  While there is no minimum period which must be left to run on the fixed term contract to enable it to be renewed or extended, it must not have ended.  Where a fixed term employee’s contract ends because it is not extended or renewed before it’s natural conclusion the employer will not be able to claim the grant once the contract ends.

Holiday continues to accrue during furlough, which is to be paid at the employer’s normal rate.  This means that an employee who takes holiday during furlough should be paid 100% of the employee’s normal pay (i.e. not the reduced furlough amount if the furlough amount is less than 100%) which means the employer is obliged to pay the additional amounts over the grant.  This also applies to bank holidays if the employee usually takes the bank holiday as leave.

The system went live on 20 April 2020 but works retroactively from 1 March 2020.  To claim, you will need your Government Gateway login as well as employer and furloughed employee details.  Once you’ve claimed and the details have been verified by HMRC, the payment will be made to you within six working days.

It should be noted that the employer still needs to continue paying their employees each month and then claims back the relevant payments using the system.

3.  Universal Credit / Working Tax Credit (Updated on 22 April 2020): A salary reduction could make a worker eligible for support through the welfare system, including Universal Credit and/or Employment and Support Allowance (see below).

GOVERNMENT SUPPORT FOR COMPANY CASHFLOW

1.  VAT (Updated on 22 April 2020): If you are a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, the Government has agreed to defer the payment of VAT. This is an automatic scheme and taxpayers are afforded until the end of the 2020/2021 tax year to pay any liabilities that have accumulated during the deferral period (accrued VAT liability must be paid on or before 31 March 2021). VAT refunds and reclaims will be paid as normal. VAT returns must still be filed and VAT is still due on invoices raised in this period.  If it is practicable to move forward an accounting reference date, the VAT reclaim can be helpful for immediate cashflow purposes, although professional advice should be taken to ensure that any other impacts are assessed.

2.  Self-Assessment Income Tax (Updated on 22 April 2020): The Government has also announced that income tax payments due in July 2020 under the Self-Assessment system may be deferred until January 2021. If there is a material change in forecast profit levels, HMRC can be contacted in order to reduce the first payment on account due in January 2021 (this is not a specific Covid-19 point, but potentially useful).

3.  Business Rates: The Government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs. There are larger sums available for other businesses.

4.  Coronavirus Business Interruption Loan Scheme (CBILS) (Updated on 22 April 2020):  This is available for companies with a turnover of less than £45m (although it has been announced that this will be extended to £500m turnover) from 40 accredited lenders (including all major banks), provided that the companies are credit-worthy, and the loan scheme can take the form of term loans, overdrafts, invoice finance and asset finance. The loans are for up to £5 million for a maximum 6-year term and are interest free for the first year (the Government pays interest for the first year and any lender fees). The Government will guarantee 80% of each loan. The lender will otherwise treat the balance as a standard loan and so their usual rigour on financial testing and collateral value will therefore apply, though insufficient security is no longer a condition to access the scheme. The borrower is still liable for 100% of the loan.  Personal Guarantees (PGs) may not be taken for facilities below £250,000.  For facilities above £250,000 PGs may still be required at the lender’s discretion, but recoveries are capped at the maximum of 20% of the outstanding balance and a principal private residence cannot be taken as security to support any PG or as security for a CBILS-backed facility.  In any event, company directors looking to mitigate their exposure and potential losses during any financial downturn will need to consider their fiduciary duties and personal obligations, as well as the application of insolvency laws in the UK which have the ability to set aside certain transactions which qualify under those laws as a preference or as a transaction at undervalue.  For further details, please see here.

5.  Director Duties re Insolvency:  On 27 March 2020, the government announced that there would be new measures to temporarily relax wrongful trading laws for directors during the pandemic. The change allows directors to pay staff and suppliers in certain circumstances, even if there are fears the company could be insolvent. Existing laws for fraudulent trading, preference payments and other insolvency rules remain in force, as does and the threat of director disqualification. Although it is unclear when the legislation will be put forward, once passed, it will apply retrospectively from 1 March and continue for three months from then. It should be noted that the current announcement is very light on detail at the moment, so this is one to watch and directors should be careful to ensure that they continue to act in the best interests of the company and take care in relation to any decision that may affect the creditors as a whole.

INDUSTRY SUPPORT FOR COMPANIES

1.  BFI SUPPORT (Updated on 22 April 2020):

Film Audience Network Covid-19 Resilience Fund: The BFI have announced several schemes to support various areas of the Film and TV industry. This scheme is aiming to help exhibitors and festivals forced to close or cancel due to Covid-19. Applications are now open and the deadline is 6pm on 6 May 2020.  More information can be found here.

BFI Development and Locked Box: The BFI has adjusted the criteria in these pre-existing schemes providing for greater flexibility in payments. The Development Fund now offers greater flexibility in the scheduling of payments and frontloading of fees. A portion of he Locked Box has been opened so that beneficiaries can access funds to help alleviate hardship, support reasonable overheads to protect business resilience in the next six months.

Audience Fund Projects Awards: The BFI has also highlighted this existing scheme which encourages application for inventive online audience-facing activity in the hope that this fund can help bring films direct to audiences while cinemas are closed.

Other BFI Initiatives: Decisions on Production Funding are ongoing to enable producers to work towards commencing production when possible. Recipients of Vision Awards are being announced this month which will support 20 production companies around the UK over the next two years. The Young Audience Content Fund is continuing to award production and development funding.  More details can be found here.

2.  PUBLIC BROADCASTER SUPPORT (Updated on 22 April 2020):

ITV Development Fund: ITV has created a £500,000 development fund to support independent producers during the crisis. The fund is predominantly aimed at non-scripted content, in order to bolster development work and allow new productions to start as soon as the restrictions are lifted for broadcast in late 2020 and 2021. Independent producers from all over the UK, whether small or big can apply to the fund.

BBC Support: The BBC has announced a range of support, which can be accessed here and is summarised below:

• The Small Indie Fund ring-fenced funding has doubled from £1m to £2m to help more companies, focussing on smaller more vulnerable companies, those in the nations and regions and those with diverse leadership
• Development is to be “super-charged” over the next few months with a focus on long and short term projects. Invitations to online briefings are due to be sent out once confirmed.
• Increased investment in archive and acquisition rights.
• Further guidance is available for those currently delivering and producing programmes for BBC.

3.  ADDITIONAL INDUSTRY SUPPORT FOR COMPANIES (Updated on 22 April 2020):

Liverpool Film Office Covid-19 Development Fund: Intended to step up support for regionally based producers, writers and other creative talent during the pandemic, the Liverpool Film Office have launched a £250,000 development fund alongside the existing production fund. This is aimed to support scripted and factual programming with awards of between £2,500 and £25,000.  It is also open to out-of-region producers looking to co-produce or collaborate with Liverpool-based talent.  The Film Office are promising a responsive service with priority given to “diverse, high quality projects that commit to spending a significant proportion of their development budget within the local creative sector, and that have the greatest potential to move quickly into production in the city region once the market returns”.  More information is available here.

Sector Financial Support: Importantly, broadcasters and public funders are looking to support the sector to the best of their powers. Broadcasters are continuing to commission and development funding remains available, with discussions on-going as to whether these funding amounts might be increased where possible. Many public funders are also looking to accelerate payments under existing awards.

FREELANCER PROTECTIONS

Freelancers are the backbone of the UK film and television production industry. Whilst the Government has been slower in showing support for freelancers than other areas of the economy, certain industry bodies have recognised the need for more immediate steps to support freelancers.

1.  Government Support for Freelancers

Announced on 26 March 2020, the Government’s package is summarised below. As with all other Government measures, there will be questions over the details of claiming. Whilst the Government may not be putting “its arms around every worker”, those arms are embracing a significant portion of the workforce – although some freelancers have been embraced quicker than others and there are limitations on those being able to claim, which may mean that many freelancers in the film and TV industry are left with no Government help during this period. The Government offer mimics that provided to furloughed PAYE workers, but will only be available to those earning up to £50,000 per annum. The payments are for 80% of average earnings, up to a £2,500 per month cap. Applications can be made from June and payments will be made then, again retroactively.The grant is taxable, and earnings will be assessed based on average monthly profits for three years. Tax returns need to be filed in order to make a claim. If there are not three years of statements available, applications will be assessed on a case by case basis, although a tax return for 2019 has to have been filed. The level of profit loss is not calculated, so whether 5% or 100% of profit is lost, there is still an entitlement to an 80% grant.Those who pay themselves through dividends are not included in the scheme, as the tax system does not distinguish between dividends through shares and those who pay themselves through dividends.

2. Industry Support for Freelancers (Updated on 22 April 2020):

Praise has rightly been heaped on the BBC and the BFI in particular for stepping up support for the Film and TV industry in the past weeks. Set out below are some of the general measures and schemes adopted (setting aside arrangements for specific projects):

2a. The BFI and the Film and TV Charity:

The BFI and the Film and TV Charity have created two industry-backed funds, the Covid-19 Film and TV Emergency Relief Fund for freelancers working across production, distribution and exhibition and the Covid-19 Repayable Grants Scheme has been set up workers who are eligible for the Self-Employment Income Support Scheme but seeks to provide cashflow support until payments are made in June. Applications closed at 6 pm on 22 April 2020.

The BFI has an excellent Q&A dealing with many common questions affecting the industry which can be accessed via this link.

2b. Other Industry Information and Support (Updated on 22 April 2020):

• ScreenSkills, partnering with WiFTV, BECTU and RTS: are offering a programme of free remote training which will include workshops, meet ups, mental health support, financial and career advice and coaching and counselling as detailed via this link.
• Unions and Guilds: Many are providing specific advice and support to members, including BECTU, Directors UK, Equity, WGGB, Production Guild, BAFTA, and IPSE.
• Film and TV Charity Support Line:  To access financial and emotional support services offered by the charity call 0800 054 0000 or email via this link.
• Creative Scotland: has created 2 Bridging Bursary programmes: a Creative Scotland Bridging Bursary Fund (supporting freelance creative professionals whose work has been interrupted due to Covid-19) and the Screen Scotland Bridging Bursary Fund (supporting self-employed screen sector workers).  See further detail via this link.
• Northern Ireland Screen: has collected information relevant to the Norther Irish animation and television production industry, see via this link.
• Screen Daily:  A continuously updated list of opportunities, initiatives, support groups and remote learning resources has been compiled, as detailed via this link.
• Pact: has published a listing of updates and provide a weekly webinar and Q&A, see via this link.
• Creative England: has collected advice across the sector, see via this link.
• Creative Cardiff: has collated useful links and information, see via this link.
• Equity: has collected resources to help members understand their rights, see via this link.
• Directors UK: has published a Q&A, see via this link.
• BFI: Q&A (as above, accessible via this link).
• IPSE has offered useful guidance on their website, accessible via this link.

2c. Additional Industry Support for Freelancers (Updated on 22 April 2020):

• Mortgage Holidays:  More detail is due, but the Government have announced that at least a three-month holiday will be available for those with mortgages.
• Landlords and Renters:  Housing possession for non-payment of rent has been suspended for 90 days, so that effectively applications to evict cannot be made until after this period (which may be extended if necessary).
• FCA/ Lender Support:  Many lenders are offering arrangements in relation to debt repayments, so it is worth contacting lenders directly.
• IR35 Tax Forms:  Implementation has been postponed until 6 April 2021.
• Screen Daily:  A continuously updated list of opportunities, initiatives, support groups and remote learning resources has been compiled, as detailed via this link.

3. Time to Pay / Tax Deferrals

This scheme provides support for the self-employed (and business owners) concerned about not being able to pay tax bills. Arrangements are made on a case-by-case basis with HMRC.

4. Universal Credit / Working Tax Credit

You should be able to access the Universal Credit if you are currently in or out of work or if you are on a low income and are affected by Covid-19. There is currently a five week wait for payment under Universal Credit.

From 6 April 2020, the Government has increased the Universal Credit and Working Tax Credit by £20 per week in addition to the annual uprating. Support for rent costs will also be paid through the Universal Credit, subject to eligibility.

Those who are self-employed can claim the Universal Credit, including advance payments upfront, provided that the requisite criteria are met, without needing to attend a job centre. The Minimum Income Floor has been relaxed from 6 April 2020 (with effect from 13 March 2020), which will apply to all claimants for “the duration of the outbreak”. It is also possible to apply for Employment and Support Allowance, which will be payable from day one rather than day eight in relation to Covid-19.

PRODUCTION MATTERS

With productions now in hiatus, producers are mitigating losses to put themselves in the best situation to restart once they are able. If this applies to you, these are some of the main items to be considered during the hiatus period:

1. Shut Down and Force Majeure Clauses:

At this stage, producers should have considered and implemented the relevant suspension or termination provisions in their production agreements. Some clients have queried whether force majeure clauses which do not specifically mention “disease” would apply: the fact that there are circumstances beyond the reasonable control of the producer and cannot be prevented or mitigated will mean that the clause will likely be applicable, although the specific terms and definitions should always be reviewed.

2. Suspension provisions in Cast and Crew Agreements: 

Speaking to clients, in most cases contracts provide for the right to suspend production activity rather than to terminate the contract, allowing productions to consider their options and the reliefs available. Producers need to (a) be monitoring the dates, as most suspension clauses apply only for a specific time period prior to a decision having to be taken to re-active production or to terminate the agreement; and (b) consider the payment obligations which may apply. For example:

• It is very unlikely that the force majeure provisions will allow suspension beyond three or four weeks, at which point usually each party has the right to terminate with varying consequences. This period can of course be extended by mutual agreement – if so, producers should ensure that this is clearly captured in writing.
• Under PACT/EQUITY agreements, cast need to be notified within three weeks if the suspension is to continue and be paid accordingly.
• Some contacts may require payment even during suspension. Producers are also considering the goodwill of the crew and cast whose contracts have been or will be terminated and who they will probably want to engage after the hiatus, sometimes paying a notice payment even if not contractually required, although of course this is another extra cost to be covered. Currently being considered is whether individuals contracted via PAYE on productions can be considered furloughed workers.

3. Delivery Obligations and Delivery Dates:  

Milestone dates should be checked carefully in finance, distribution and broadcast contracts: postponed delivery dates may push the likely repayment of production loans beyond the originally contracted maturity dates (thereby triggering an Event of Default unless otherwise negotiated), rights may have been sold to third parties for delivery by certain dates which can no longer be met, broadcasters may have identified release slots which may be missed or there may be relevant force majeure clauses in distributor or completion guarantor agreements which tend to run longer than those in production agreements (although extensions are normally capped unless otherwise agreed). In some cases, production partners are showing some willingness to accept the unprecedented nature of current events and to revise these dates accordingly. It is better to address this now in order to have certainty about proceeding with the current partners or otherwise use the time now to put in place alternative arrangements. A good example is the shift of a number of theatrical releases to SVOD platforms which would generally need the agreement of the various parties involved.

4. Financial protection for shut-down and re-start costs: 

• Production Insurance:  Whether or not cover is in place will very much depend on the type of insurance, whether it contains an exclusion for COVID-19, whether the notice provisions and other terms were followed and what is being claimed as the cause of the suspension or stoppage. Even where there is no exclusion for COVID-19, the insurance policy may only cover expenses where an individual contracts the virus which has been proven (and we know that testing is only undertaken if the individual is taken seriously ill) and not for the consequences of the individual just self-isolating. A common ground for cover is that of Civil Commotion or inability to gain access to premises, but in each case the claim needs to be promptly and carefully handled.
• Support of financing and distribution/broadcast partners:  A dialogue should be opened as soon as possible with all partners to ascertain the likelihood of the partners covering these costs. Some broadcasters have shown more commitment than others to shoulder this expense, but it very much depends on the specifics of the applicable production.
• Government and Regional Support:  At present, the UK Government has not announced any specific support measures to help those productions and the lost costs incurred as a result of the shutdown and possible restart. Each production has very different considerations due to the applicable requirements of the relevant financiers, production set-up and broadcasters/distributors. However, several bodies including PACT and Lee & Thompson are lobbying for further support in this respect and there are discussions at Government level to try to secure more backing. We will update you as soon as we’re able.
• Tax Credit on Costs to date:  If the production is qualifying for the UK tax credit, an interim claim can be made in respect of the pre-production and production costs to date. We have been in touch with the Certification Unit at the BFI and they are prioritizing completing the applications as quickly as possible. They are also accepting online applications on the basis that the normally requisite accompanying statutory declarations from lawyers can be received in 3-6 months.

We are committed to supporting our clients and the sector as a whole at this difficult time.  If you would like to discuss any of the points noted above or have any other questions, please do not hesitate to get in touch with your usual contact at Lee & Thompson.

Read about our Film and Television sector experience.