UK BUDGET: 25% Tax Relief for Animation to be Replaced with 39% Expenditure Credit
The Chancellor Jeremy Hunt has today announced a change to the current tax relief system for animation in the Budget.
The old system (ATR) saw animation productions able to claim up to 25% tax relief. This will be reformed with a new system where up to 39% of expenditure credit can be claimed ahead of a production for animation and children’s tv programmes. Film and high end TV will be eligible for 34% expenditure credit.
This means that production companies will be granted the money ahead of their production as opposed to being able to claim it back after it has been spent on the production – good news for cash flow.
Following the announcement Kate O’Connor Executive Chair of Animation UK said;
Animation U.K. has been campaigning to achieve a tax increase for animation over the last few years. We need to look at the detail in terms of the move to the expenditure model but we are delighted with the increase to 39% and the real boost this will give to our brilliant animation sector.
This is not a simple raise from 25% to 39% in tax relief and the real detail will become available later in the year. It’s not clear what elements of the 39% will be taxable after the money is granted and therefor what the real terms change to production finance this will be. For now this is what the budget states.
Reforms to audio-visual tax reliefs – Following a public consultation, the
film, TV and video games tax reliefs will be reformed, becoming expenditure
credits instead of additional deductions from 1 April 2024. The new Audio-Visual
Expenditure Credit will replace the current film, high-end TV, animation and
children’s TV tax reliefs. Film and high-end TV will be eligible for a credit rate of 34%
and animation and children’s TV will be eligible for a rate of 39%. The expenditure
threshold for high-end TV will remain at £1 million per hour. The new Video Games
Expenditure Credit will have a credit rate of 34%. Qualifying expenditure for the
Video Games Expenditure Credit will be expenditure on goods and services that
are used or consumed in the UK. Games that have not concluded development on
1 April 2025 may continue to claim EEA expenditure under the current video games
tax relief until this relief sunsets in April 2027.
This is the first significant change to UK government support of the animation industry since 2012 when the 25% relief was introduced in the UK. Since the initial boost a myriad of different systems around the world have been introduced, reducing the UK’s competitive edge to the point where recently Aardman announced that they may have to move abroad.
The headline figure of 39%, up from a different one of 25% will hopefully reintroduce the UK as a viable place to conduct animated business internationally.