International investment in the Irish film, television and animation industry is being hindered by a cap on the tax credit that can be claimed by productions made in the Republic, a new report commissioned from PwC by Ardmore Studios and Troy Studios says.
The upper limit of €70 million in eligible expenditure per project on which the section 481 screen tax credit can be claimed is hurting the attractiveness of the State for large-scale international productions, it finds, arguing that the ceiling should either be increased or abolished completely.
Several competitor markets for foreign direct investment (FDI) in the audiovisual industry – including the UK, Hungary, Australia and New Zealand – no longer impose a cap, while the entire sector is seeing a spending boom worldwide that has sent the average cost of productions surging.
An independent 2017 report, commissioned by the then government from consultants Olsberg SPI and Nordicity, recommended that the cap be increased to €100 million but this was not acted upon.
The tax credit was worth €469 million to the Irish economy in 2019 – a return on investment of €3.80 for every €1 it costs the exchequer – according to the PwC report, which was commissioned with the support of Animation Ireland and Screen Producers Ireland.
Some 124 productions were supported by section 481 relief during the year, enabling the employment of 16,952 full-time positions and providing an estimated 40,000 days of skills training and development.
Elaine Geraghty, chief executive of Ardmore Studios and Troy Studios, said the State was well-placed to take advantage of "a step change" in global content demand.
“What is becoming increasingly clear, however, is that the upper limit of €70 million on our section 481 tax incentive is a barrier to Ireland securing those large-scale international productions,” she said.
Government ambitions
“The Government’s stated ambition is to increase the scale of the sector to a point where we will double employment to 24,000 people, delivering a gross value added of some €1.4 billion. To achieve this, the section 481 incentive needs to be adjusted to ensure Ireland remains as competitive globally as possible.”
In 2019 productions to avail of section 481 included television shows Normal People, Miss Scarlet and the Duke, and The Young Offenders, as well as animation series Rescue Bots, Micronauts, Vampirina and Doc McStuffins, and films such as The Rhythm Section and Cartoon Saloon’s Oscar-nominated Wolfwalkers.
Last year, despite the pandemic disrupting much production activity worldwide, claimants included Netflix's Vikings spin-off Valhalla, the platform's recently released teen series Fate: The Winx Saga – filmed at Ardmore Studios in Bray and at nearby Kilruddery House – and Apple TV Plus's upcoming science fiction series Foundation, filmed at Troy Studios in Limerick.
Irish animation companies including Cartoon Saloon, meanwhile, are waiting for clarification from Revenue on whether work completed remotely by its crew from locations outside the State as a result of pandemic restrictions will be allowed as qualifying expenditure under the scheme.
Studio space
The call for more favourable tax credit terms comes as the Irish industry attempts to catch up with demand for large-scale studio space. There are three “relatively large” facilities in the State – Ardmore, Troy and Bray’s Ashford Studios, where Valhalla is made – but when these are occupied, potential investment may be lost.
The development of three new studio projects in Greystones, Ashbourne and Grangecastle will be “an important step” in expanding large studio space capacity for bigger productions, particularly those in the €150 million-€200 million bracket, the report notes.
But it adds that certainty on section 481 will be critical to this infrastructure’s commercial viability.
