Are you aware of the proposed reforms to audio-visual tax reliefs?

The consultation paper needs to be read by everyone involved in the media sector

HMRC has this month issued a consultation document with proposed reforms which include simplifying the raft of film and TV reliefs and merging film, animation, high end TV, children’s TV reliefs into one tax credit scheme

The consultation paper needs to be read by everyone involved in the media sector at: www.gov.uk/official-documents.

The consultation will run from 17^th November to 9^th February. Feedback is invited from all interested parties and should be emailed to: audiovisualtaxreliefs@hmtreasury.gov.uk

It is expected that reforms to the audio-visual reliefs will be implemented in Spring 2024.

The foreword to the consultation has been written by Victoria Atkins MP and Financial Adviser to the Treasury who comments ‘The UK’s film, television and video games industries are genuinely world-class, projecting our values and influence around the world. It is encouraging to see the recent report on the impact of the film and television tax reliefs, published alongside the consultation, which shows strong evidence that they have made the UK a more attractive filming and production location than would otherwise be`. The report itself goes on to say `there is strong evidence that all four tax reliefs have led to more productions taking place in the UK than would have otherwise occurred in the absence of the reliefs.’

There are eight creative tax reliefs covering film, television, animation, high end TV, video games, theatre, orchestra and museums and galleries. The consultation focuses on the five audio-visual reliefs.

Headline proposals:

Simplification

Merging Film Tax Relief, Animation Tax Relief, High End TV Tax Relief and Children`s Tax Relief into a single tax credit.

Modernising HETV tax relief

Increase the minimum expenditure (currently £1m per 60 minute slot) to better reflect current production costs and budgets.

Existing HETV tax legislation requires programmes to have a minimum time slot of 30 minutes, the government is considering

• amending the legislation so that it applies on an `episode by episode` basis as intended, but with a reduced minimum time slot of 20 minutes
• removing the minimum slot length requirement

Modernising Video Games Tax Relief.

Currently the conditions for VGTR originate from EU State Aid rules. The government is considering removing the eligibility of European expenditure from VGTR and replacing it with a requirement for expenditure to be ‘used or consumed’ in the UK.

The government is also interested in the level of subcontracting currently undertaken, and whether companies would be likely to raise or lower their level of subcontracting if European expenditure is excluded.

Expenditure credit

New expenditure credit to be calculated directly from eligible audio-visual expenditure, instead of being an adjustment to the company’s taxable profit under the existing regime

The 80% cap on qualifying expenditure.

The government acknowledges that there is a perception that the 80% cap on qualifying expenditure encourages more portable aspects of production to move abroad. The government will explore removing the cap, but this may necessitate a lower overall credit rate, to avoid a substantial additional cost to the taxpayer.

I again would strongly urge all interested parties to read the consultation in detail and give their feedback. There will of course be considerable discussion and debate on these proposals, especially I suspect around the proposed HETV reforms.

If you require more assistance, please do contact us.

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