Autumn Statement: Amendments to creative sector tax reliefs
Expected boost planned for visual effects expenditure along with reversal of proposed cap on connected party transactions
Changes for creative sector tax reliefs
Following the release of draft legislation for the Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC) back in July, the Government has announced some further amendments following a period of consultation. The main amendment will affect the highly anticipated proposed cap on connected party transactions that was expected to impact many claimants in the creative sector industry, in particular where special purpose vehicles (SPVs) are often used. Alongside these changes, a new consultation has been opened on the design of additional tax relief for visual effects expenditure which the Government intends to deliver through the AVEC.
Amendments to AVEC/VGEC
The Government has announced some minor changes which will be legislated for in the upcoming Autumn Finance Bill, including:
- For both AVEC and VGEC - amendment to rules for connected party transactions in creative industry tax reliefs. The proposal to exclude expenditure that represents connected party profit has been amended to allow for transactions that are charged at an arm’s length price. Companies will now be required to disclose connected party transactions;
- Extension of uplifted relief for animated TV to include animation film –animated feature films will be now eligible for the higher 39 percent credit under the AVEC; and
- Amendment to the definition of ‘documentary’ for High-end TV – the new definition is aligned with the guidance used by the British Film Institute and will apply to the AVEC.
Embracing visual effects
The Government wants to encourage creative industries to embrace new technologies with a focus on boosting the visual effects sector. A new consultation has been opened on the design of additional tax relief for expenditure on visual effects, which the Government intends to deliver through the AVEC. The Government is consulting on the detailed policy design of further support and intends to implement changes to the expenditure credit from April 2025.
