The creative industries are estimated to have added £125 billion to the UK economy in 2022 and to employ approximately 2.4 million people. The government is keen to be seen to continue to support this sector and the Chancellor made several announcements to that effect.
Audio-Visual Expenditure Credits (AVEC)
These replaced Film and TV Tax Relief Credits from 1 January 2024.
The relevant company can claim an expenditure credit based on a percentage of qualifying expenditure. Qualifying expenditure will be the lower of either:
- 80% of total core costs
- The amount of UK core costs
They can claim the following expenditure credit rates:
- 39% of qualifying expenditure for children’s TV programmes, animated films, and animated TV programmes
- 34% on all other films, video games and TV programmes
In the Budget, the Chancellor proposed two changes:
- The tax relief credit will be increased by 5% but only on the UK visual effects costs
- The 80% cap on total core costs will not apply to visual effects costs
In summary, they are, therefore, improving the relief for expenditure on UK visual effect costs.
UK Independent Film Tax Credit (IFTC)
This is a new tax relief announced in the Spring Budget 2024. This measure introduces additional support for ‘independent films’ that can currently claim the AVEC: the Independent Film Tax Credit (IFTC). Films that meet the IFTC qualifying criteria will be eligible for a higher rate of expenditure credit on their qualifying expenditure. The basic rate of credit under AVEC is 34% — independent films will receive a rate of 53%.
To qualify for the IFTC, a film must pass a new test administered by the British Film Institute. The test is intended to target films that have projected core expenditure of £15 million or less. The test is also 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 amount of credit that a company will be able to claim under this scheme will be capped at the maximum amount that would be available for a production with core expenditure of £15 million.
Films that do not qualify as independent films can continue to claim AVEC at the basic rate of 34%, or the uplifted rate of 39% for animated films. Companies will not be able to claim both the IFTC and the announced additional relief for visual effects expenditure in respect of the same film.
The higher rate is available on expenditure incurred from 1 April 2024, for films which commence principal photography on or after 1 April 2024. Claims can be made from 1 April 2025.
This represents a significant boost to independent and low budget films which are often the birthing pool for the great producers, directors, and actors of the future.
Business rate relief
The government will introduce a 40% relief on gross business rates bills for eligible film studios in England, until 2034.
We have seen a steady increase in film and TV studios in the UK in the last few years with the UK now rivalling Hollywood. This can only be a further boost for this development.
Tax relief for theatres, orchestras, museums and galleries
This measure confirms new permanent rates of relief for theatre, orchestra, museums and galleries exhibition tax reliefs. The non-touring and touring and orchestral rates will be set at 40% and 45%, respectively from 1 April 2025. The sunset clause for museums and galleries exhibition tax relief has been removed. This relief has been a lifeline for this sector, and it being made permanent is extremely welcome news.
Contact us
If you have any questions or want to explore the latest creative industry changes, please don’t hesitate to contact David Hadley or a dedicated member of our Corporate and Business Tax Team. We’re here to assist you every step of the way.
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