The measure
The Chancellor announced that the rate of film tax relief will increase to 25% for all qualifying expenditure and the distinction between limited budget and other films will be removed. This increases the relief available for the largest budget films and is a welcome simplification, removing the cliff edge thresholds in the relief.
The minimum UK expenditure threshold for television tax relief will be reduced from 25% to 10%, bringing it in line with film tax relief and increasing the number of high-end television and animation productions that will benefit from the relief.
The Chancellor also confirmed that, as announced at Autumn Statement 2014, the new children's television tax relief and orchestra tax relief will be introduced from 1 April 2015 and 1 April 2016 respectively. Following consultation, the Chancellor announced that the rate of relief for orchestras has been set at 25% and that children's television tax relief will apply to children's programmes that are game shows or competitions.
Who will be affected?
Film production companies, television production companies and orchestras.
When?
Subject to state aid approval by the European Commission, the changes to film tax relief will apply from the earlier of 1 April 2015 and the date state aid approval is received. The changes to television tax relief do not require state aid approval and will be introduced from 1 April 2015. As previously announced, the children's tax relief will be introduced from 1 April 2015 and the orchestra tax relief will be introduced from 1 April 2016.
Our view
A recent report commissioned by the creative industries shows that UK government spending on creative tax reliefs has significant economic benefits. Together, the creative tax reliefs encourage over £1.5 billion in overseas investment into the UK. Every £1 of government expenditure on film tax relief generates a return of £12.49 to the economy and every £1 on high-end TV tax relief generates a return of £8.31.
The increase in the rate of relief for the largest budget films is a welcome change, improves the international competitiveness of the UK regime. The changes remove the cliff edge thresholds in the regime and complete the simplification measures introduced in 2014. The changes will provide certainty on the amount of credit available for larger budget films, which is important when the tax relief is taken into account in funding decisions.
Orchestras will welcome the fact that the Chancellor has set the rate of relief at 25%. We look forward to reading the detailed response to the consultation, particularly on the definition of orchestra. The proposed definition in the consultation was seen by some as restrictive and elitist, requiring players drawn from all four of the following sections: string instruments, woodwind instruments, brass instruments and percussion instruments.
Ofcom figures show that British children watch almost 17 hours of television per week and the regulator has voiced concerns about the amount of Children's TV being made in Britain. A joint report by Pact and The Ragdoll Foundation revealed that the volume of original UK children's content commissioned by public service broadcasters fell by 68% between 2003 and 2013. These measures encourage the production of high quality, educational and entertaining programmes in the UK.
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