UK producers welcome Hunt’s changes to film, TV tax credits in 2023 budget

UK producers’ association Pact has welcomed chancellor of the exchequer Jeremy Hunt’s new plans to change the tax credits system in film and TV production, revealed today as part of the government’s spring budget.

Jeremy Hunt

Hunt said he would be introducing an expenditure credit with a rate of 34% for film, high-end television (HETV) and video games, replacing the previous 25% tax credit, and that the qualifying threshold for HETV will remain at £1m (US$1.2m).

Expenditure credit is calculated differently to tax credit and the changes represent a 0.7% rise in real terms, according to the British Film Institute (BFI).

For producers in the animation and children’s TV sectors, that expenditure credit figure will rise to 39% and replace the 20% tax relief under the current system. The BFI said this works out as a 5.7% increase in real terms.

The changes are expected to come into effect from January next year, with further details to be unveiled this summer.

The expenditure credits will be available to claim from January 1, 2024. However, to give companies time to adjust there will be a transition period. Film and TV programmes that have not concluded principal photography, and video games in development, on April 1, 2025 may continue to claim the existing tax reliefs until March 31, 2027.

Other key elements to Hunt’s new plans include the minimum slot length for HETV being reduced from 30 to 20 minutes and applied on an episode-by-episode basis, while the definition of a documentary will be put into legislation and based on guidance currently used by the BFI.

The BFI summed up the changes by saying: “At the core of the reforms is the decision to move all five reliefs to a refundable expenditure credit model. The audiovisual expenditure credit will cover the current film and TV tax reliefs and the video games expenditure credit will cover the video games tax relief.”

Pact this afternoon responded to Hunt’s plans by saying it “welcomes the outcome of the government’s consultation on audiovisual tax reliefs announced in today’s budget.”

In December 2022, Pact submitted a report on children’s and animation TV tax credits to the government, recommending an increase to the current tax relief, and today it said the new level of 39% “should help stimulate investment in children’s and animation content and build on the success of the existing tax credit.”

The association added: “Pact is also pleased that the government has listened to concerns raised by both Pact and UK broadcasters about raising the minimum expenditure threshold for HETV tax relief.”

Pact said it provided evidence to the government that raising the threshold would “damage domestic production, particularly regional productions, comedies and documentaries” as these productions often have lower budgets and would also result in fewer British dramas and, in particular, comedies being made in the UK.

Ben Roberts

Ben Roberts, CEO of the BFI, commented: “We welcome the chancellor’s news today of the reformed expenditure credits across our screen industries, a testament to how crucial they are to the UK’s economy and growth.

“The screen sector tax reliefs – now remodelled as expenditure credits – have supercharged our industry on an unprecedented scale. The news today will ensure the UK remains a truly globally competitive production hub, giving us economic recovery and growth, creating thousands of jobs.

“It’s good news that the HETV threshold has been preserved. I am particularly heartened to see a much-needed boost for children’s television and animation as two areas of cultural and societal importance in which the UK excels creatively, but that still have significant growth potential.”

A record £6.27bn was spent on HETV production and film in the UK in 2022, according to official figures published by the BFI. The lion’s share of the total spend was contributed by HETV production with £4.3bn, the second highest it has ever been, with feature film production contributing £1.97bn to the total spend.

Hunt, the MP for South-West Surrey, said in his spring Budget speech: “Our film and TV industry has become Europe’s largest, with our creative industries growing at twice the rate of the economy.

“This government’s audiovisual tax reliefs have helped make our film and TV industry the biggest in Europe. Only last month, Pinewood announced an expansion which will bring another 8,000 jobs to the UK.

“To give even more momentum to this critical sector I will introduce an expenditure credit with a rate of 34% for film, high-end television and video games and 39% for the animation and children’s TV sectors. I will maintain the qualifying threshold for high-end television at £1m.”