We ask for “a bit of stability” in the wake of the Chancellor’s announcement of further adjustments to creative industries reliefs, despite the new measures being “obviously welcome”.
Continued Adjustments to Creative Industries Reliefs
Despite the recent implementation of the Audio-Visual Expenditure Credit (AVEC) legislation in FA 2024, the Chancellor has proposed additional modifications. This comes shortly after the introduction of the new legislation.
Visual Effects Expenditure
Under the current AVEC legislation in FA 2024, the credit rate for film and high-end TV productions is established at 34%. However, in the Spring Budget, the Chancellor has suggested increasing this rate to 39% for expenditure on visual effects in these productions. Furthermore, the 80% cap on qualifying expenditure is proposed to be lifted for visual effects expenditure.
A consultation will be conducted soon to determine what qualifies as visual effects expenditure. While this could be promising for companies in this sector, it is a future measure to be included in a forthcoming Finance Bill, potentially post-General Election. Whether this remains a priority for a new government remains uncertain.
Small Independent Film Productions
The Chancellor has also proposed the introduction of an Independent Film Tax Credit (IFTC), with a generous 53% credit rate for films with budgets under £15 million that meet new British Film Institute test conditions. Details of this test are not yet available, but it is suggested that it will require key talent, such as the writer and director, to be from the UK, or the film to be an international co-production.
Clarity is still needed on what exactly defines an ‘independent’ film production beyond the limited budget. Additionally, qualifying expenditure for the IFTC will be capped at 80% of the total core expenditure, with an overall cap of £6.36 million on the total taxable credit a film can receive. The higher rate will apply to expenditure incurred on or after 1 April 2024, provided principal photography also begins on or after that date. Claims can be made from 1 April 2025.
Permanent Rate Changes for TTR, OTR, and MGETR
Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR), and Museum and Galleries Exhibition Tax Relief (MGETR) rates were temporarily increased in 2021 following the Covid pandemic to aid sector recovery. These temporary increases, extended again in F(2)A 2023, were set to end on 31 March 2025. However, the Chancellor has announced that these rates will now be made permanent.
The sunset clause for MGETR will also be removed, meaning this relief will not end from 31 March 2026. This is another instance of temporary reliefs eventually becoming permanent, potentially allowing the Chancellor to gain credit multiple times.
Call for Stability
While these changes are undoubtedly beneficial, a period of stability would be greatly appreciated. Rapid changes, though advantageous for tax advisers, may not necessarily aid businesses in planning their investments effectively.
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