Digging into the latest HMRC creative industries claim statistics (FY23/24)

HMRC has published creative industry claim statistics for the 2023/24 financial year, setting out comparative data for each of the reliefs in terms of amount of relief paid and number of claims.

This covers films (FTR), TV (HETV), animations (ATR), video games (VGTR), children’s TV (CTR), theatre (TTR), orchestra (OTR), and museums galleries and exhibitions (MGETR) (abbreviations for relief as used in this insight in brackets).

The context

While benefitting from generous tax reliefs, the creative industries are no less exposed to the headwinds currently battering UK business. Some face industry-specific ones, such as real terms decreases in cultural funding.

This makes creative industry tax reliefs even more important to claimants. Often, the relief forms an essential component of production budgets, without which some productions would not get green-lit. While critics cite abuse of the reliefs (such as via the perceived ease of passing the BFI’s cultural test), in most cases, the regime is doing what it was designed to. It is fostering British creativity and cultural production output, not to mention supporting employment in the creative industries (and those serving them).

While the transition from legacy audio-visual reliefs to audio-visual expenditure credits (AVEC) and video game expenditure credits (VGEC) results in only a marginal increase in the effective rate of relief, the permanent increases in the rates of TTR, OTR and MGETR are significant. We expect to continue seeing increased HMRC scrutiny of what spend is receiving relief at these higher rates.

Creative industry data

Due to the period the data relates to, a relatively small amount of AVEC and VGEC claims are captured for the first time. For simplicity, they are included with relevant predecessor reliefs, i.e. AVEC claims relating to films are included under FTR. Interestingly, looking at data for all AVEC and VGEC claims to date, TV claims make up 63% by value, with films being only 20%.

There is an inherent time lag because claim data is allocated to the financial year in which the claimant company’s accounting period ends. This muddies the water in evaluating trends – for instance, much of the increase in value of TTR claims made in the year (65%) will be reflecting the more than doubling of the value of TTR via the temporary increase in rates in 2021 (largely preserved via the permanent increase in rates in from April this year).

Key headlines from the latest creative industry statistics

Accounting for such factors, the statistics still make for interesting reading for those involved in the creative industries.

A few of the headlines are:

• c.£2.4 billion in reliefs were paid out (a 10% year-on-year increase).
• Other than FTR, the year saw increases in the value of relief paid out across all reliefs.
• The decrease in FTR was mainly in relation to high-value claims (over £5 million).
• The largest proportional rises were in the values of TTR and CTR claims.
• The value of VGTR claims continued its unbroken upward trajectory. This reflects the doubling in size of the UK market since 2013, although the UK is facing increasing competition as a games development location.

Impact of the streamers

HETV accounted for £1.1 billion (46%) of relief paid out in the period. This is an increase of only 3% on the prior year. However, as a proportion of total relief paid out, this has increased significantly compared with financial year 2020/21, when it accounted for c.29% of total relief.

Barring a pandemic-related fall in the value of claims in 2020/21 due to production disruption, the value of HETV claimed has increased each year since 2013/14, from c.£50 million to c.£1.1 billion (a twenty-fold increase in a decade). The introduction of the relief spurred commissioning activity from local broadcasters and, increasingly, from US streamers. This played a large part in pushing investment in UK film and TV drama to new heights during and following the pandemic.

Commissioning by streamers has shifted a significant amount of UK film production activity towards broadcast rather than cinema release, and films made for broadcast rather than theatrical release have been claiming HETV rather than FTR. This is a factor in the value of FTR claims remaining below pre-pandemic levels, compared to HETV which has more than doubled since 2019/20. Related to this is a lasting post-pandemic appetite for consuming newly released films at home, borne out by UK cinema box office revenues remaining c.20% down on pre-pandemic levels.

Production activity by the large streamers also helps explain the c.50% increase in the value of CTR claims made in the period, as the main driver of this increase was the number of high-value claims (over £500,000).

Celebrating increased creative industry tax relief payments

We see the continuing rise in payments made under the creative industry tax reliefs as a positive. Of course, a driver of the rise in payments is increases in rates. However, credit payments are also based on actual expenditure, so we are seeing claimants being encouraged to spend more money on productions and to put on more. The creative industry tax reliefs are directly fuelling economic activity in industries where the UK is a world-leader, helping to promote UK economic growth.

How Moore Kingston Smith can help

With deep expertise in the creative industries, Moore Kingston Smith supports production companies, studios and cultural organisations in navigating the evolving tax relief landscape. Contact us for advise on eligibility and structuring claims, managing HMRC scrutiny and transitioning to the new expenditure credit regimes.