Consultation responses on Audio-visual tax reliefs

Spring Budget 2023 has seen the release of the summary of responses to the Audio-visual tax reliefs consultation.  The Government will release draft legislation for stakeholder comment as part of L-day.

The consultation collated views on reforming and merging a number of creative tax reliefs in similar sectors to ensure they were effective, provided value for money and were simple to administer.

The five Audiovisual reliefs covered by the consultation were:

• Film Tax Relief (FTR)
• Video Games tax relief (VGTR)
• Animation Tax Relief
• High-end TV tax relief (HETV)
• Children’s TV tax relief

Feedback from the consultation in respect of TV and Film reliefs included:

• The majority of respondents in the film and TV sectors claimed more than one tax relief. 
• Respondents were content to combine the TV and Film reliefs provided that this was implemented to retain simplicity, ease of use and provide flexibility to adapt to the different characteristics of production.
• Supporting the proposal to update of the minimum slot length for TV productions to 20 minutes per episode.
• Welcoming the clarity that legislating a definition of 'documentary' would bring to the industry.
• The prospect of raising the minimum expenditure threshold from £1m was met negatively.

Feedback from the consultation in respect of Video Games Tax Relief included:

• The majority of video game producers tended to claim only a single relief.
• Respondents were negative in respect of the removal of EEA expenditure as a qualifying cost.
• Subcontracting is common in video game production and proposals to extend or remove, the sub-contracting cap from £1m were supported.

General feedback in respect of the computation of reliefs confirmed:

• There was not opposition to changing the basis on which the relief was calculated provided that it provided the same economic value and accessibility as the existing regime.
• There should be a smooth transition between regimes.

 Following the consultation the government will:

• Introduce two models for relief, one covering film and TV (the Audio Visual Expenditure Credits giving a headline rate of 39%) and one for video games (the Video Games Expenditure Credit giving a headline rate of 34%).
• The Research and Development Expenditure Credit (RDEC) will form the basis for the tax relief credit which will change the way the relief is calculated by referencing qualifying expenditure rather than adjusting the taxable profit.
• Both models will have the same eligibility requirements, definitions of qualifying expenditure and the 80% cap on qualifying expenditure.
• There will be a transition to the new models:
  • Claims may be made under the new models from accounting periods on or after 1 January 2024.
  • Claims must be made under the new models for new ventures from 1 April 2025.
  • Film, TV productions and computer games which have begun, but have not finished, development on 1 April 2025 can continue to claim under the current system.
  • All expenditure incurred after 1 April 2027 must be under the new models.
• Changes to High-end TV tax relief will include
  • The minimum expenditure threshold will remain at £1m per hour.
  • The minimum slot length will reduce to 20 minutes per episode.
  • The definition of ‘documentary’ will be legislated.
• Changes to Video games tax relief will include:
  • Expenditure will only qualify if on goods and services used or consumed in the UK. European Economic Area expenditure will be excluded.
  • A minimum of 10% of expenditure must be on goods or services used or consumed in the UK.
  • The sub-contracting limit of £1m will be removed.

Draft legislation will be released for stakeholder comment at L-Day 2023.

Useful guides on this topic

Film, Animation and TV tax relief
Film, Animation and TV tax relief are three reliefs that are part of the UK's suite of creative industry tax reliefs.

Video Games Development relief
Video Games Development tax relief is a tax relief that can be claimed by game production companies in respect of expenditure incurred in the development of British video games. The relief provides an enhanced deduction of expenditure for Corporation Tax relief or alternatively a repayable tax credit may be claimed.

Creative Industries Tax Reliefs: At a glance
Creative Industries Tax Reliefs, are a growing suite of special company tax reliefs that are similar in form to Research & Development (R&D) tax relief.

Audio-visual tax relief consultation
Autumn Statement 2022 has been accompanied by a Consultation entitled 'Audio-visual tax reliefs' which seeks views on reforms to simplify and modernise the relief to support growth in the sector.

External links

Audio-visual tax reliefs: consultation - Summary of responses