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Key takeaways from the Film & TV Production Restart Scheme rules

25 September 2020

After a long wait following the Government’s July announcement of the Film & TV Production Restart Scheme (the Scheme), a £500m fund to cover Coronavirus-related losses suffered by film and TV productions, further information about how the Scheme will work has now been published.

The Scheme was introduced to facilitate the commencement or re-commencement of new and existing film and TV productions in the UK that have been unable to proceed due to a lack of insurance against certain Covid-19 related risks

Producers could potentially make use of the scheme for film and television productions they are planning to make that will commence principal photography before 31 December 2020 (and could then potentially be covered for losses up to 30 June 2021). See below for a short summary of the rules.

There is a financial consideration, which is that the fee to participate is 1% of the production budget, there is also an excess which would apply and the maximum amount that can be claimed under the Scheme is £5 million.

Applicants would also need to establish that they have been unable to obtain cover for the Covid-19 risks, or self-insure, on commercially viable terms. See the Commercial Viability Criteria below.

A short digest of the rules:

Will my production be eligible?

To qualify for the Scheme:

  • the relevant film production company must be solely resident in the UK or another European Economic Area state for tax purposes;
  • the production must meet the normal cultural test established under UK tax credit rules;
  • 50% of the production budget must be spent in the UK (different rules apply to co-productions).
  • the production must meet the Commercial Viability Criteria – see below; and
  • the production must not be an “Excluded Production”, such as filmed live events or current affairs.

If a production with a budget of at least £30 million continued to be filmed during lockdown (i.e. end of March through July), it will be presumed not to meet the conditions for the Scheme.

Producers Alliance for Cinema and Television (PACT), who have had extensive conversations with the government about the Scheme, have indicated that the Scheme could apply to films and shows financed by US studios and SVODs, provided that the claiming entity is domiciled and paying tax in the UK, and the claiming entity would normally have been required to obtain its own insurance for the project, rather than being covered by a group blanket insurance scheme or studio self-insurance.

What are the Commercial Viability Criteria, and how will they be determined?

The Commercial Viability Criteria are met where:

  • Commercial Insurance is not available: the production company has sought to secure insurance cover for COVID-19 risks either: (i) through one regulated insurance broker; or (ii) directly, through at least two regulated insurers, and in either case request(s) have been rejected or the only insurance cover that was offered was not on commercially viable terms. Insurance products are considered commercially unviable where the value of the premium quoted is so high, and/or the nature of the cover offered is so limited, that it would not be commercially reasonable for the production to rely on such insurance;
  • Other cover is not available: the production company is not able to rely on another source of cover for risks covered by the Scheme (e.g. a group insurance policy, a self-insurance structure or another government fund or scheme in a jurisdiction outside of the UK);
  • Insurance for non-COVID risks has been obtained in the customary way: the production company has in place (or has agreed in principle) insurance cover provided by a regulated insurer in respect of all risks that would normally be covered for a production (excluding any of the COVID-19 risks covered by the Scheme); and
  • A production contract is in place which includes or appends the agreed budget and a production schedule and either the production company has either been unable to release funds under that contract (and therefore unable to commence or restart production) because of its inability to secure cover for Covid-19 related risks, or has only been able to get those funds released in reliance on anticipated eligibility for the Scheme (which would necessarily mean that funds were only released/filming restarted after the Scheme’s announcement on 28 July).

All participants will be required to submit a signed self-assessed declaration that confirms that these criteria have been met. Participants may incur legal liability if this declaration is false or misleading.

For production budgets in excess of £30 million, the Department for Digital, Culture, Media and Sport (DCMS) will determine whether the Commercial Viability criteria have been met, and the production company will be required to submit evidence, including for example communications with insurance providers, evidence that group insurance policies do not apply and self-insurance is not relevant, and formal notifications from the financier that the production could not restart.

Is there a fee?

Yes. A fee will be payable to DCMS of 1% of the production budget for productions that are just commencing, or for existing productions that are re-starting, 1% of the part of the gross production budget that relates to expenditure incurred after 28 July 2020 (after applicable deductions). There are different thresholds for co-productions.

Note that the guidance suggests that the fee is payable regardless of whether the claim is successful. However if the production company applies for the Scheme and is not deemed eligible there is a possibility that the fee may not need to be paid.

What losses will be covered?

 Only two categories of loss are covered by the Scheme, namely Cast Losses and Civil Authority Losses:

Cast Losses are the losses a producer incurs when a production has to be interrupted, postponed or abandoned, as a result of:

  1. one or more members of the cast or crew (whose roles are necessary elements in the production) contracting COVID-19 and having to stop working (either through death or illness); or
  2. one or more so-called “Named Persons” needing to take time off work because of the death or critical illness of a member of their immediate family due to COVID-19. Note that in order to claim under this limb, at the time of registering the production company will need to list up to five individuals to be Named Persons, each of whom must either be a key cast member or the director.

Civil Authority Losses are the losses a production company incurs when a production has to be interrupted, postponed or abandoned due to:

  1. the actions of a UK Civil Authority (that is, the UK Parliament, the UK government (or any devolved or local form of government) or any police force in the UK) in response to COVID-19 that prevents a participant from accessing a production location – for instance, where a local lockdown prevents a participant from going to a filming site;
  2. one or more members of the cast or crew (whose roles are necessary elements in the production) being unable to perform their jobs because they are acting in accordance with regulations, written directions or written guidance issued by a UK Civil Authority in response to COVID-19 (“UK Civil Authority Restrictions”) – for instance, where an individual self-isolates after displaying COVID-19 symptoms, or is required to self-isolate following contact with the UK government’s track and trace programme, as required by current guidance; or
  3. the introduction of new, or the amendment of existing, UK Civil Authority Restrictions and this change has a material negative impact on the completion of the production in the original timeframe.

The relevant losses must be contractually the responsibility of the applicant production company  and cannot be recoverable under any insurance scheme.

When a production has to be interrupted or postponed, the losses suffered by a producer will be measured as the production costs which were necessarily and reasonably incurred in completing the production over and above the expenditure that would otherwise have been incurred, had the death or illness not occurred (in the case of Cast Losses) or, in the case of Civil Authority Losses, (i) the action of the UK Civil Authority not taken place or (ii) the action taken in respect of UK Civil Authority Restrictions not occurred.

When a production has to be abandoned, the losses suffered by a producer will be measured as the production costs which have been rendered entirely valueless solely and directly by reason of the death or illness (in the case of Cast Losses), or, in the case of Civil Authority Losses, (i) the action of the UK Civil Authority or (ii) the action taken in respect of UK Civil Authority Restrictions.

A production company may claim for losses incurred both pre-production and post-production as well as during principal photography, provided all the relevant criteria under the Scheme rules have been met.

What exclusions or other restrictions are in place?

Firstly, there is a testing requirement. To make a successful claim for compensation where an individual is thought to have contracted or been exposed to COVID-19 and, therefore, cannot perform his or her job, a producer will need to demonstrate that the affected individual has had a Medical and Healthcare Products Regulatory Agency approved PCR Test as soon as reasonably practicable, and, in any event, within 48 hours of developing symptoms or being required to self-isolate or quarantine. The PCR Test may be self-administered by the individual (if received by post), or administered by an appropriately trained medical professional at a licensed health clinic or a government-operated COVID-19 testing facility. If the PCR Test comes back negative (and, therefore, shows that an individual has not contracted COVID-19), a producer must ensure that the relevant individual commences or continues (as applicable) his or her duties in the production as soon as practicable thereafter. There has been no commentary from the government on the current difficulty in the UK of obtaining tests and how that might affect the timeframes set out in the rules.

In addition, there are more specific exclusions which relate to the Cast and Civil Authority heads of losses more particularly. Some Cast Losses exclusions include if the relevant person was over 70, and if the relevant person was in breach of the UK’s Governmental, local authority, police or civil authority restrictions or British Film Commission (BFC) Safety Guidelines at or around the time or contracting Covid-19 or being required to self-isolate, whether in their personal or professional life (unless the breach was required for the person to render services on the production, as long as they were complying with the BFC guidelines). It will therefore be important for producers to ensure that their key cast and crew are complying with all applicable restrictions in their personal life too.

There is a requirement for producers to mitigate their losses, for example by replacing individuals on set, (temporarily or permanently), or making adjustments to the production timetable.

Is there an Excess? Is there a total cap?

Yes, and yes. Compensation will only be given if the value of all eligible losses incurred in respect of the relevant production in aggregate exceed a particular threshold known as the “Retention”. The Retention is the greater of: (i) £1,000; and (ii) a sum equal to 10% of the value of the losses in respect of which compensation is to be paid.

If compensation is granted, it will be the amount of the eligible losses minus the value of the Retention.

Compensation will be capped at of 20% of the production budget for delay or disruption to production, and 70% of the production budget for total abandonment of a production. For losses springing from a key cast or crew member’s absence due to family member illness or death, compensation will be capped at five consecutive days’ worth of losses.

There is a total cap of £5 million of compensation per production.

What other requirements should I be aware of?

  • The production must credit the UK government for making the Scheme possible in the opening or closing credits, and the guidance contains specific text and a logo.
  • Producers must comply with the guidance issued by the BFC in relation to working safely during the COVID-19 pandemic or (where applicable) the equivalent guidance published by PACT.
  • Applicants should comply with certain “Social Commitments” listed in the rules. These include that the production must:
    • not take on unpaid internships and ensure all personnel are paid the National Living Wage;
    • consider meaningfully whether the production can meet at least two of the BFI’s Diversity Standards and Set of Principles to Tackle and Prevent Bullying, Harassment and (or in the case of TV, equivalent broadcaster policies), or if it is not reasonably able to meet those criteria, develop and implement its own equivalent policies;
    • publish on its website diversity targets and policies on bullying, harassment and racism in the workplace; and
    • meaningfully consider making payments into the appropriate ScreenSkills funds and offering ScreenSkills or equivalent recognised training or upskilling.

The Social Commitments may change with time, in which case to the extent that it is commercially reasonable to do so, the production company will need to use reasonable efforts to implement them. That said, it appears that only a material or persistent failure would lead to ineligibility.

What are the key dates?

  • The film production company will need to apply to the Scheme before 31 December 2020.
  • The Scheme applies to productions which commence filming (i.e. at least 5 filming days or 20% of scheduled filming days), before 31 December 2020 (although there is already speculation that this will be extended) and will cover claims for losses up to 31 June 2021, which is the current planned closure date.
  • The relevant loss must have been incurred on or after 28 July 2020, but before the closure date.

What other factors to be aware of?

  • The Scheme is still in draft and subject to change. This note is based on the rules and guidance notes as published on 17 September 2020.
  • The launch date for applications is still to be announced and the Scheme is still subject to EU State Aid Approval. The launch date will not be announced until approval is granted.
  • The scheme is discretionary – DCMS will determine whether a producer or production qualifies.
  • There is a cap on the scheme as a whole of £500 million and DCMS may close the scheme if it appears that cap is close to being reached (although registered productions should still be covered).

Finally, a warning against utilising the Abandonment Cover

If a production company abandons a production and wishes to recover the losses it has incurred, it may be required to transfer the legal rights in respect of the production to DCMS, or give a legally binding undertaking to DCMS not to exploit the production for 10 years. This was introduced to deter applicants from claiming abandonment except as a last resort. If the production company wishes to reacquire rights it may do so by repaying the abandonment costs covered by the Scheme. This requirement does not apply to production companies seeking to recover losses for delay or disruption only.

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