Creative and tech industry tax reliefs for 2024

The 2023 Autumn Statement announced details of enhanced tax credit relief for the creative and tech sectors.

Creative sector

In a move to boost the tech creative landscape, the Treasury has announced a revamped tax credit system, effective from 1 January 2024 to provide extra financial help to the British film, TV, and video game sectors.

Under the new tax credit system, Children's TV, animated TV, and animated film productions will enjoy additional tax relief to help boost innovation and nurture talent.

The Audio-Visual Expenditure Credit and Video Games Expenditure Credit replace previous tax reliefs to offer more substantial relief and to provide more flexibility and transparency in production decisions.

The new system extends the relief to animated films and TV programs.

The tax credit rate is increased by 4.25% for animation and children's TV productions, and by 0.5% for film, high-end TV, and video games.

Unlike the previous system, credits will now be directly calculated from a production or game's qualifying expenditure, ensuring a more straightforward process and eliminating adjustments to taxable profit.

Transition and Adaptation:

Acknowledging the need for the industry time to adapt, the government is allowing productions and games in development until 1 April 2025 to continue using the previous tax reliefs until 1 April 2027.

Industry Collaboration:

The move to reform tax relief has been a collaborative effort, with industry consultations shaping both the policy and the legislation. This is now embodied in Finance Bill 2023-24.

This tax credit initiative aligns with other recent Treasury measures, including making full-expensing permanent and extending relief rates for theatre, orchestra, and museums.

As production companies consider the new tax credit regime, they will need to evaluate the financial implications of the uplift, keep clear records for all transactions, create a plan to transition to the new system, review contractual agreements and tax strategies, anticipate cashflow impacts, and ensure productions meet revised definitions.

Research & Development Tax Credits

In addition to the above creative tax credits, there is a new R&D expenditure credit regime from 1 April 2024.

The R&D expenditure credit and the small or medium enterprise (SME) schemes will be merged into one scheme for accounting periods beginning after 31 March 2024. The rate under the merged scheme will be 20% and the notional tax rate applied to loss-makers will be the corporation tax small profit rate of 19%.

The enhanced support for R&D-intensive SMEs will continue. The intensity threshold for the level of R&D expenditure required to qualify for enhanced support will be reduced from 40% to 30% from 1 April 2024.

Loss-making companies claiming the existing SME tax relief will be eligible for a higher payable credit rate of 14.5% if they meet the definition of R&D intensity.

For claims made after 31 March 2024, the use of nominations for R&D tax credit payments will be removed, meaning that payments have to go directly to the claimant company.

Further information

If these tax credits are of interest for your business, or you would like to discuss how you could make a claim, please contact a member of our Technology team for a conversation.