New tax credits for British film, TV and video game makers start from today

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James Bond in Skyfall. (Photo credit: Sony Pictures)

British film, TV and video game producers will benefit from new, more generous tax credits that start today (1 January 2024).

To maximise the potential of the UK’s cutting-edge production industry and help incubate unique British talent, the government’s Audio-Visual Expenditure Credit and the Video Games Expenditure Credit replace the previous tax reliefs for film, TV and video games.

All companies will receive more tax relief than they did under the previous system, greater flexibility over production decisions and greater clarity about the amount of credit companies can expect to receive.

Nigel Huddleston, Financial Secretary to the Treasury, said:

We are backing the makers of the next Barbie, Happy Valley and Grand Theft Auto with this new, more generous, tax credit system for British production talent.

The UK is a world leader in creativity, and we want to ensure that continues well into the future by making it easier for British film, TV and video games to thrive.

Financial Secretary to the Treasury, Nigel Huddleston. Photo credit: UK Gov – Attribution 3.0 Unported (CC BY 3.0) licence.

Under the new system, a children’s TV production, animated TV production or film with £1 million of qualifying expenditure will receive an additional £42,500 in relief. A high-end TV production, film production or video game will receive £5,000 in relief. To ensure fairness, the uplift in relief for animation will be extended to include animated films as well as TV programmes.

The credits will be calculated directly from a production or game’s qualifying expenditure, instead of being an adjustment to the company’s taxable profit.

Animation and children’s TV productions will be eligible for a higher credit rate of 39%, a rate increase of 5.5% under the previous reliefs. The 34% credit rate for film, high end TV and video games is roughly equivalent to a rate increase of 0.5% under the previous tax reliefs.

The new system applies to the whole of the UK. The government has listened to feedback from industry that companies will need sufficient time to adapt to the new expenditure credits. For this reason, productions and games in development on 1 April 2025 may continue to use the previous tax reliefs until they end on until 1 April 2027.

The move to reform tax relief for entertainment productions and video games was announced at the Spring Budget in March 2023. The system implemented today was developed hand in glove with the UK entertainment industry, with consultations on both the policy itself and the draft legislation. It is being legislated as part of the Finance Bill 2023-24.

The UK’s creative industry is already worth £126bn and the UK has the largest video game employee base in Europe, at nearly 21,000 by the last estimate.

Today’s new tax credit system is the latest move by UK Government in support for British creative industries. The Chancellor also announced that full-expensing will be made permanent in 2023’s Autumn Statement, helping creative businesses invest for the less by saving them 25p in every £1 they spend on qualifying equipment and machinery.

At Spring Budget 2023, the Chancellor also extended the rates of relief for theatre, orchestra and museums for two additional years to April 2025.

In September last year, coinciding with a visit by the Chancellor Jeremy Hunt to Warner Bros. Studios in Los Angeles, it was announced that the production giant would expand their studio in Leavesden, Hertfordshire, in 2024. The move is expected to create 4,000 new jobs in the UK and contribute more than £200m to the UK economy.

Source: HM Treasury

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