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This article provides a summary of the key Creative Industry Tax Relief reforms announced in the 2024 Budget
In the 2023 Autumn Statement, the Chancellor announced reforms to modernise the creative tax relief system by introducing a new Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC). Further measures were announced in the 2024 Budget totalling over £1 billion of additional tax reliefs. These announcements aim to boost growth in the sector and ensure the reliefs remain sustainable.
This article provides a summary, in chronological order of the key changes.
There is a 34% expenditure credit rate for films, high-end TV and video games (with a 5% uplift for animation, visual effects costs, and children’s TV to a credit rate of 39%). The expenditure credits will be treated as gross taxable income and appear as other income in the financial statements.
New productions and video games must claim under the new expenditure credits from 1 April 2025, and all productions must claim under the expenditure credits from 1 April 2027 when the current tax reliefs will end.
You will still be required to report each production or game as a separate trade for tax reporting purposes. We were hoping that HMRC would have taken this opportunity to simplify the creative sector relief by removing the need to report separate trades for corporation tax purposes.
An online Additional Information Form (AIF) will become compulsory for all claims made on or after 1 April 2024. HMRC has encouraged using an AIF for some time, but this will now become compulsory; a claim for relief will only be valid if the AIF has been filed online. In addition to standard company and tax agent details, you must provide your VAT registration number and PAYE reference number. Depending on the relief type claimed, you must give critical information about the production or projects. This includes start dates, phase dates, total expenditure, and core expenditure. If you’re claiming film, TV, or video game productions, you must include a digital version of the British Film Institute (BFI) certificate for each production or game.
If disclosed on the Additional Information Form, you can only claim relief on expenditures relating to connected party transactions. For each production or project, you must disclose the total number of connected parties and the combined value of all connected party transactions. For each transaction, you need to provide the connected party's name, the transaction's date, the amount of expenditure and a description of the goods or services provided.
A new UK IFTC will provide a higher rate of credit of 53% for ‘independent films’ which pass a new test administered by the British Film Institute (BFI). The test is intended to target films that have a projected core expenditure of £15 million or less and is expected to require that either key talent on the film, such as the director and writer, must be from the UK or the film must be an international co-production.
The rates of relief for Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR) and Museums and Galleries Exhibition Tax Relief (MGETR) will be permanently set at the higher rates of 40% (for non-touring productions) and 45% (for touring productions and all orchestra productions). The government will also remove the sunset clause for MGETR so that it becomes a permanent tax relief with no expiration date.
Companies should ensure that from the 1st of April 2024, they complete the online HMRC Additional Information Form before submitting the Company Tax Return. You must disclose any connect party transactions, as failure to do so would mean these costs will be removed. With connected party transactions becoming transparent, we expect HMRC to focus on arm’s length transfer pricing during compliance checks. For this reason, we would recommend that a review of transfer pricing policies, documentation, and evidence to support arm’s length pricing is undertaken.
Whilst the above has hopefully sketched out the main details of the new reforms, we understand that this is still a complex area within the legislation.
For any additional advice or guidance, we recommend you get in touch with one of our experts. With experience in making successful creative tax relief claims, our team will be happy to help you navigate this particularly complex set of rules.
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Food and drink R&D (eligible under the R&D tax credit scheme) covers any project that aims to push the boundaries of knowledge and technology within the industry.
This article provides a summary of the key Creative Industry Tax Relief reforms announced in the 2024 Budget
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