The British entertainment industry is experiencing a significant transformation, highlighted by the recent report from HM Revenue and Customs (HMRC) released on August 24. High-end television (HETV) tax relief has surpassed traditional film tax relief for the first time, signalling rapid changes in the UK’s creative sector. In this article, we analyse the report’s key findings and their implications for the future of British entertainment.
The official statistics publication from HMRC delves into various creative industries’ tax reliefs, including Film, High-End Television, Animation, Video Games, Children’s Television, Theatre, Orchestra, and Museums and Galleries Exhibition tax reliefs, covering accounting periods up to March 2022.
This annual release presents a comprehensive picture of the state of the creative sector. The latest data reflects the financial year 2021 to 2022 and showcases notable changes in the industry’s tax relief landscape.
High-End TV Takes the Lead
The standout revelation in this report is that HETV tax relief has triumphed over its film counterpart for the first time. In the 2021 to 2022 financial year, HETV tax relief accounted for 50% of the total relief paid out, while Film tax relief claimed 31%. This shift highlights a significant transition in the entertainment industry’s dynamics.
Doug Shanks, Partner at DSC Metropolitan, commented on this development, saying, “The ascendancy of HETV tax relief is a testament to the evolving preferences of audiences and content creators alike. High-budget productions in television have captured imaginations and garnered immense viewership, ultimately translating into substantial tax relief.”
This transition has been driven largely by an uptick in high-budget HETV productions.
The UK continues to be a sought-after destination for international film production, as evidenced by recent blockbuster movies like Barbie and Mission Impossible that have chosen to shoot significant portions of their scenes in the country.
The rapid growth in this sector aligns with recent data from the British Film Institute, illustrating substantial increases in HETV production expenditure in recent years.
Film Tax Relief
Film tax relief hasn’t been dethroned and it continues to be a crucial player in the creative industry’s tax relief arena. In the 2021 to 2022 financial year, there were 770 claims for Film tax relief, totalling £517 million. This reflects a notable 24% increase in relief compared to the previous year.
It’s important to recognise the impact of the COVID-19 pandemic on these statistics. Claims for Film tax relief plummeted in the 2020 to 2021 financial year due to pandemic-induced disruptions. While they have rebounded, they have yet to reach pre-pandemic levels, signalling a gradual recovery.
Animation and Video Games
The report also sheds light on other creative industries, such as Animation and Video Games. For instance, Animation tax relief (ATR) remained steady, with 85 claims amounting to £21 million. Video Games tax relief (VGTR) saw 345 claims totalling £189 million, although this reflected a 6% decrease compared to the previous year.
Theatres, orchestras, Museums and Galleries
In the wake of the pandemic, theatres, orchestras, and museums and galleries have all shown commendable signs of resurgence, with increased activity compared to the previous year. Theatre tax relief (TTR) experienced a notable resurgence, with 725 claims amounting to £55 million, showcasing a 12% increase in claims and a staggering 57% surge in relief paid out. The recovery comes after a tough period for theatres due to COVID restrictions. The government’s temporary increase in relief rates for TTR, part of its COVID recovery support, has likely played a role in this resurgence.
Similarly, Orchestra Tax Relief (OTR) faced a decline in the number of claims and productions, down by 21% and 50%, respectively, compared to the previous year. The orchestra industry has struggled to rebound from the pandemic’s effects, especially for orchestras with lower-budget productions. However, the value of OTR relief has more than doubled compared to the previous year, primarily due to a recovery in high-budget productions and the enhanced relief rates introduced as part of the government’s COVID recovery support.
The Museum and Galleries Exhibition Tax Relief (MGETR) experienced a slight increase in the number of claims, productions, and the amount of relief claimed in the 2021 to 2022 financial year. It’s important to note that relief under MGETR is available exclusively to charitable companies and subsidiaries of charities and local authorities, with tax credits capped per exhibition.
Doug Shanks comments: “While these creative sectors are showing signs of improvement, it’s clear that they are still on the path to complete recovery, and continued government support remains crucial to their resurgence.”
The Future of British Creativity
The HMRC report paints a dynamic picture of the UK’s creative industries. As high-end television assumes a more prominent role, it’s evident that audiences are drawn to compelling storytelling across various formats. This shift in demand and production is mirrored in the tax relief statistics.
“The entertainment landscape is evolving, and it’s essential for industry professionals to adapt and explore opportunities in HETV and other thriving sectors,” says Doug. “This report underscores the resilience and adaptability of the British creative industry.”
With government support and a rapidly changing media landscape, the future looks promising for UK creatives, whether they’re crafting blockbuster films, riveting television series, or innovative video games. As the creative sector continues to evolve, so too will the ways in which tax relief supports and incentivises the generation of world-class content.