Changes on the way for the Creative Industry Tax Reliefs

After strong lobbying from the theatre industry, still recovering from the aftershocks of Covid, the higher rates of relief previously introduced in October 2021, due to taper down from 1 April 2023,  have now been extended for a  further 2 years, until 31 March 2025. Stand-alone productions will continue to benefit from a rate of 45%, and touring productions 50% – these will now taper down to 30%/35% for 12 months from 1 April 2025. Similar rates will apply to orchestra, museums and galleries relief. As practitioners, we will no longer need to worry about apportioning costs pre and post 1 April, at least for another 2 years!

One other expected change to theatre relief and orchestra relief, post Brexit, sees EEA spend excluded from eligibility from 1 April 2024, but the minimum UK core spend is reduced from 25% to 10%. In practice we expect this to have little impact.

Following a widespread consultation, we will see very substantive changes to the audio-visual reliefs from 1 January 2024. The detail will be published later in the year. The whole system will change to a “refundable expenditure credit” – in other words a simple subsidy delivered by a cash payment based on eligible costs. This will replace the current system of enhancing the costs for tax purposes to create a loss, which can be surrendered for cash or used to reduce taxable profits. We anticipate this will be much easier to understand and to operate. We hope this change in the system will be extended to theatres and orchestras in future in order to streamline the entire suite of creative industry reliefs.

The rates of relief under the new system for film, high-end TV and video games will be 34%, and for children’s TV and animation 39%. However the payments will be treated as taxable receipts so the effective rates will not be dissimilar to the present rates of relief. The entry point for high-end TV relief will remain at £1m per hour – there had been fears that this would be raised.

Finally, there will be some anti-abuse legislation in relation to payments between connected parties. Whilst in our experience the reliefs work very well and are not abused, clearly HMRC felt the need to address this point to remove some bad apples, and we welcome the change.

For more information about Creative Industry Tax Reliefs please contact Anthony Pins or Dave Morison.