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Creative industries receive welcome tax relief in Spring Budget

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The Spring Budget saw the continuation of creative industry reliefs, as well as some added extras, to ostensibly highlight the government's commitment to the audio-visual sector, writes David O'Keeffe.

15th Mar 2023
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In his Spring Budget, the Chancellor has once again extended and enhanced the relief for the various creative industries. Following the recent consultation on reform for Audio-Visual tax reliefs, the intention is now confirmed to merge film and TV relief and create an RDEC-like relief for what it will term Audio-visual Expenditure Credit (AVEC). At the same time, it will create a similar relief for video game expenditure, to be known as Video Games Expenditure Relief (VGEC).

The AVEC will actually be split into two, with film and high-end TV attracting a credit rate of 34%, while animation and children’s TV will attract a rate of 39%. VGEC will attract a rate of 34%. I’m not sure at the moment why the rates are different, but I assume there has been an analysis of the benefits.

The new expenditure credits can be claimed for accounting periods on or after 1 January 2024. From 1 April 2025, all new productions must claim relief under the expenditure credit rules. Film and TV that have started but not concluded principal photography, and video games that have begun but not concluded development at 1 April 2025 can continue to claim under the existing relief until 31 March 2027. Thereafter expenditure must be claimed under the expenditure credit.

At the same time, for high-end TV relief, there will be slight reductions in the slot length and changes to the definition of a documentary to create more clarity. There will also be some other changes to video games relief. EEA expenditure will not be eligible for the VGEC relief and the subcontracting limit of £1m per game will also be removed for that relief.

For companies continuing to claim the current video games relief, EEA expenditure will continue to be eligible, and the subcontracting limit will continue to apply. That relief will expire, however, from 31 March 2027 (as above).
In addition to these significant changes to audio-visual reliefs, the government is extending the temporary rate increases for theatre tax relief (50% or 45% depending on whether a touring production or not), orchestra tax relief (50%) and museums and galleries tax relief (50% or 45% as above). These enhanced rates will continue to apply for a further two years until 1 April 2025. Museums and galleries relief was due to expire on 31 March 2024 but that is extended until 31 March 2026.

The government is clearly committed to these creative industries' reliefs, it certainly seems to like changing and extending them. I can only assume that the statistics demonstrate that they are helping to generate investment in UK industries. To be honest, I do have my doubts as to their effectiveness. Hopefully, I am wrong and the changes to the audio-visual reliefs in particular will be perceived as positive by those looking to invest in those sectors.

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