Spring Budget 2024

Archive

View a previous budget

Tags

Measure

Audio-Visual reliefs – consultation response

The measure

The film, TV and video games tax reliefs will be reformed to refundable expenditure credits:

  • the ‘Audio-Visual Expenditure Credit’ will cover the film and TV tax reliefs; and
  • the ‘Video Games Expenditure Credit’ will cover the current video games tax relief.

These reformed reliefs will be modelled on the existing research and development expenditure credit, with specific adjustments.

 

In respect of the Audio-Visual Expenditure Credit:

  • the specific criteria for each of the current film and TV reliefs will be preserved;
  • film and high-end TV will be eligible for a credit rate of 34%, ensuring that the same level of generosity is mirrored across both the existing and new regimes;
  • children’s TV and animation will be eligible for a higher credit rate of 39%, reflecting the government’s intention to provide additional support for these industries;
  • the £1m per hour expenditure credit threshold for high-end TV will remain unchanged;
  • the minimum slot length for high-end TV will be reduced to 20 minutes, applied on an episode-by-episode basis; and
  • a documentary will be defined in legislation and based on the British Film Institute’s definition.

 

The Video Games Expenditure Credit will have a rate of 34%. Qualifying expenditure for the Video Games Expenditure Credit will be no longer be EEA expenditure, rather expenditure on goods and services that are used or consumed in the UK. Games in development on 1 April 2025 may continue to claim EEA expenditure under the current video games tax relief until April 2027.

 

Who will be affected?

Taxpayers who carry out film, TV and video game development activity within the UK.

 

When will the measure come into effect?

Taxpayers will have the opportunity to claim the new Audio-Visual and Video Games Expenditure Credits from 1 January 2024.

From 1 April 2025 new games and productions must claim the new Audio-Visual and Video Games Expenditure Credits.

Games and productions in development on 1 April 2025 will be permitted to claim relief under the existing regime until 31 March 2027, after which all taxpayers must claim the new Audio-Visual and Video Games Expenditure Credits.

Our view

The reform of the Audio-Visual reliefs will be welcomed by those in the industry who had raised concerns in relation to the treatment of the existing regime for Pillar Two purposes. It is therefore also welcome that taxpayers can choose to adopt the Audio-Visual and Video Games Expenditure Credits from 1 January 2024, aligning with the introduction of Pillar Two in the UK.

Compliance and administrative challenges may arise for taxpayers that choose to transition to the new Expenditure Credits mid-way through a production. Draft legislation is expected to introduce provisions to manage this transition.

The decision to increase support for children’s TV and animations as well as retain the £1m expenditure threshold demonstrates the government’s commitment to investing in the UK creative industries.

Also welcomed is the decision to allow video game developers to continue to claim relief on EEA expenditure until March 2027, as introducing this change without a suitable transition period may have threatened the completion of games currently under development. We do however recognise that high-end games in particular have a long development life-cycle and there may be some games that are not completed by the sunset period.