As previously reported by Wiggin, in 2023 changes were made to tax reliefs for the film, high end TV, animation, video game, children’s TV, theatre, orchestra, museum and art gallery industries, moving from a system that allowed organisations to claim tax reliefs by way of a deduction from profits or surrender of a loss for a tax credit, to a system where they receive an above the line tax credit based on qualifying expenditure which would be taxable. In its recent Spring budget, the Government announced further welcome changes to the tax credit system.

The Government will introduce a new Audio-Visual Expenditure Credit (“AVEC”) specifically for independent films with budgets under £15 million that meet the requirements of a new British Film Institute test, at a credit rate of 53% on qualifying film production expenditure (which equates to an effective rate of 39.75%). The AVEC credit rate is 34% for other films. Productions will be able to make claims from 1 April 2025 in respect of expenditure incurred from 1 April 2024 onwards provided that films started principal photography from 1 April 2024. Further, following the call for evidence in 2023, the AVEC credit rate for visual effects expenditure in film and high-end TV will be increased to 39% from April 2025, and the 80% cap on qualifying expenditure will be removed for visual effects expenditure. The government will consult on the types of expenditure that will be in scope of the additional tax relief and implement the measure through a future Finance Bill.

Eligible film studios in England will also receive a 40% reduction on gross business rates bills until 2034 and bills will be backdated to 1 April 2024.

For theatres, orchestras and museums and art galleries, from 1 April 2025 the tax credit rates will be permanently set at 40% (for non-touring productions) and 45% for touring productions and all orchestra productions. The sunset clause for the museums and galleries exhibitions tax relief will be removed.

A related development is the publication of The Relief for Creative Industries (Additional Information Requirements and Miscellaneous Amendments) Regulations 2024. Coming into force on 1 April 2024, the Regulations amend existing legislation to require claims for the creative sector tax reliefs to be submitted electronically, and specify the additional information required to be provided by claimant organisations in support of their claims for the tax reliefs, the time by which that information should be provided, and the consequences of failure to provide it. This includes information that must be disclosed where a claim relates to connected party (i.e. intra-group) transactions.

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