FB: Creative sector tax reliefs

Finance Bill 2022 sets out welcome increases to creative sector reliefs announced in the Autumn Budget along with further clarifications.

Finance Bill 2022 sets out welcome increases to creative sector reliefs announced in.....

In very welcome news for a sector which has been particularly impacted by COVID-19 restrictions, Finance Bill 2022 includes draft legislation temporarily increasing the creative sector tax reliefs for theatres, orchestras, museums and galleries where production commences on or after 27 October 2021 up to 31 March 2024. Museums and galleries exhibition tax relief (MGETR) is also extended until that date having been due to expire on 31 March 2022. In addition, there is a relaxation in film tax relief taking effect from 1 April 2022 allowing continued qualification where intended distribution changes from a cinema release to a streaming (or similar) service. Finally, there are a number of clarifications to the existing legislation, which whilst minor, could significantly impact some claims.

Increased tax credits

The Finance Bill confirms the Chancellor’s announcement that the headline rates of tax credit will increase as follows:

Period

Theatre Tax Relief (TTR)

Museums and Galleries Exhibition Tax Relief (MGETR)

Orchestra Tax Relief (OTR)

27 October 2021 to 31 March 2023

Non-touring productions: 45% (from 20%)

Touring productions: 50% (from 25%)

Non-touring productions: 45% (from 20%)

Touring productions: 50% (from 25%)

50% (up from 25%)

1 April 2023 to 31 March 2024

Non-touring productions: 30%

Touring productions: 35%

Non-touring productions: 30%

Touring productions: 35%

35%

1 April 2024 onwards

Non-touring productions: 20%

Touring productions: 25%

TBC

25%

 

It also clarifies that these rates will apply where the production phase begins on or after 27 October 2021 and that the cap on tax credits payable under MGETR will remain unchanged (at £100,000 for a touring exhibition and £80,000 for a non-touring exhibition).

Film Production: Switch from cinema distribution to streaming

The draft legislation sets out how film production companies (for any new film commencing production or ongoing productions that have not completed principal photography by 1 April 2022) can claim relief for films that were initially intended to be released in cinemas, but which are instead put on streaming services.

The key condition is that the film meets the criteria for High-End TV Tax Relief, broadly that:

1.     The programme is a drama, documentary or animation;

2.     The programme is not an excluded programme, for example an advert, game show or a broadcast of a live event;

3.     The slot length of the programme is greater than 30 minutes; and

4.     The average core expenditure per hour of slot length is not less than £1 million.

Clarifications

The Government has legislated to clarify several areas of ambiguity to reinforce the original policy intent. These changes will have effect where production commences on or after 1 April 2022. Whilst each change is relatively small, they could have a significant impact on the eligibility of some productions and/or companies to qualify for relief, as well as on the quantum of claims.

For TTR and OTR, amongst other changes, the clarifications exclude productions produced for training purposes and, perhaps more importantly, amend the ‘commercial purpose condition’ which must be met to qualify for the reliefs, such that:

  • To be regarded as a performance to members of the general public a performance must be separately ticketed and it be intended that a significant proportion of the earnings from the performance should be obtained by ticketing; and
  • To be regarded as being provided for educational purposes a performance must be provided mainly for the purpose of educating the audience.

There is also a clarification on what expenditure qualifies for an ‘educational body’, such as a college or university, which could reduce the quantum of claims.

Two other noteworthy changes specific to individual reliefs are:

  • TTR – To meet the qualification conditions each performance must be to at least five individuals (previously there was no minimum); and
  • MGETR – The display of an object or work is no longer considered an exhibition to the extent that the display is subordinate to the use of the object or work.