What the government’s 2023 Budget means for the creative industries
Chancellor Jeremy Hunt delivered the government’s 2023 Budget on 15 March. Here’s a round-up of measures relevant to businesses in the creative industries.
If you’re a Bristol Creative Industries member and you’d like to share your view on Budget 2023, email Dan.
Describing his speech as a “Budget for growth,” Jeremy Hunt referenced the creative industries twice:
“Our film and TV industry has become Europe’s largest, with our creative industries growing at twice the rate of the economy.”
“I also want to make our taxes more competitive in our life science and creative industry sectors.”
In the full Budget document released after the speech, the government references the creative industries as being one of the five sectors it is focusing on for growth. The others are green industries, digital technologies, life sciences and advanced manufacturing.
The document says:
“The government will turn its vision for UK enterprise into a reality by supporting growth in the sectors of the future. There are opportunities to accelerate the progress of the technologies that will define this century by encouraging investment and smarter regulation.”
In terms of specific announcements for the creative sector, the Budget includes the following:
The government is reforming audio-visual tax reliefs into expenditure credits with a higher rate of relief than under the current system. This follows the government’s consultation last year.
The changes are as follows:
- 34% credit rate for film and high end TV and 39% for animation and children’s TV via the Audio-visual Expenditure Credit
- 34% credit rate for eligible video games projects via the Video Games Expenditure Credit
For the Audio-visual Expenditure Credit, the minimum slot length for high end TV will be reduced to 20 minutes, and applied on an episode-by-episode basis.
The government will put a definition of ‘documentary’ into legislation based on guidance by the British Film Institute (BFI):
“a factual or realistic programme based on real events, place or circumstances and intended to record or inform.”
The documentary definition will apply to the audio-visual expenditure credit and the current high end TV tax relief.
Final wording and exclusions to the definition will be published as part of draft legislation in Summer 2023 for comment.
The £1m per hour expenditure credit threshold for high end TV will remain unchanged.
Eligibility criteria for the Video Games Expenditure Credit will require a minimum of 10% of expenditure to be on goods or services used or consumed in the UK.
The new expenditure credits can be claimed from 1 January 2024, but there will be a transition period to allow companies to adjust:
- From 1 April 2025, claims for new productions and games must be made under the expenditure credits system.
- Film and TV productions that have begun but not concluded principal photography, and video games that have begun but not concluded development on 1 April 2025 may continue to claim relief under the current system until 31 March 2027.
- Any expenditure incurred from 1 April 2027 must be claimed under the expenditure credit regime.
Commenting on the change, Ben Roberts, CEO of the BFI, said:
“We welcome the chancellor’s news of the reformed expenditure credits across our screen industries, a testament to how crucial they are to the UK’s economy and growth. Combined with our extraordinary talent, infrastructure and technical and creative expertise, the screen sector tax reliefs – now remodelled as expenditure credits – have super charged our industry on an unprecedented scale.
“The news will ensure the UK remains a truly globally competitive production hub, giving us economic recovery and growth, creating thousands of jobs for people up and down the country and enabling creative talent and storytelling to thrive. It’s good news that the high end TV 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.”
The temporary higher headline rates of relief for Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR) and Museums and Galleries Exhibitions Tax Relief (MGETR) will be extended for two years from 1 April 2023
The headline rates of relief for the TTR and the MGETR will remain at 45% (for non-touring productions) and 50% (for touring
productions). OTR rates will remain at 50%.
From 1 April 2025, the rates will be 30% and 35%. On 1 April 2026 the rates of relief for TTR and MGETR will return to 20% and 25%. The headline rates of relief for OTR will return to 25%.
The government said its new chief scientific adviser, Professor Dame Angela McLean, will oversee a review into the creative industries.
In the November 2022 Autumn Statement the government said that from 1 April 2023 the SME research and development (R&D) tax relief scheme will decrease from 130% to 86%, while the SME credit rate will decrease from 14.5% to 10%.
This led to criticism from many organisations about the potentially negative impact on UK innovation. In response, the 2023 Budget includes the launch of a new SME R&D scheme from 1 April 2023 although it only benefits around 20,000 businesses. Loss-making companies that spend at least 40% on R&D will be able to claim £27 from HMRC for every £100 of R&D investment.
Among the businesses the government says will benefit are around 4,000 digital SMEs from the computer programming, consultancy, and related activities sector.
Speaking during the Budget, Hunt said:
“To strengthen our position in artificial intelligence (AI), in which the UK hosts one third of European companies, I’m accepting all nine of the digital technology recommendations made by Sir Patrick Vallance in the review I asked him to conduct in the Autumn Statement.
“I can report that we will launch an AI sandbox to help innovators get cutting edge products to market. We’ll work at pace with the Intellectual Property Office to provide clarity on IP rules so generative AI companies can access the material they need. And we’ll ask Sir Patrick’s successor Dame Angela McLean to report before the summer on options on growth duty for regulators.”
The government will also award a £1m prize every year for the next 10 years to researchers that drive progress in critical areas of AI. It will be known as the ‘Manchester Prize’, named after the world’s first stored programme computer which was built at the University of Manchester in 1948.
Creative businesses and individuals from the south west who take part in Edinburgh’s annual festivals may be interested in new government funding of up to £8.6m.
The Budget said the money “could help build a permanent headquarters for the Edinburgh Fringe Festival and create year-round opportunities for local artists and talent across Edinburgh festivals”.
Although none are in Bristol or the south west, there could be some benefits for local businesses with connections or offices in the regions chosen for the government’s new investment zones.
The zone will focus on the government’s “priority sectors”, which includes the creative industries. They will each receive £80m for tax reliefs, improving skills, providing specialist business support, improving the planning system, or boosting local infrastructure.
The English zones will be in:
The following are announcements not specific to the creative industries but are of interest to businesses in the sector.
The previously announced increase in corporation tax from 19% to 25% for businesses with profits over £250,000 will go ahead as planned from 1 April 2023.
Companies with profits of £50,000 or less will continue to pay corporation tax at 19%. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief providing a gradual increase in the effective corporation tax rate.
There is more advice on what the corporation tax changes mean for businesses in this post.
The £2,500 Energy Price Guarantee (EPG) for households in Great Britain has been increased for another three months from April to June.
No new energy support was announced for businesses. The Budget confirmed that the Energy Bills Discount Scheme will replace the Energy Bill Relief Scheme from 1 April. The new scheme, which runs until 31 March 2024, is significantly less generous.
Jeremy Hunt announced several measures aimed at helping the unemployed, parents and the over 50s to get jobs or increase the hours they work.
This includes extending free childcare to working parents of children from nine months old. The changes will be rolled out in stages:
For the over 50s, new ‘returnerships’ will bring together the government’s existing skills programmes. They will promote accelerated apprenticeships, Sector-Based Work Academy Programme placements and Skills Bootcamps to the over-50s.
All the labour market announcements in Budget 2023 are outlined here.
In a shift to focusing on local authorities having powers to deliver activity such as business support, the government said it intends, subject to consultation, to withdraw all remaining central support for Local Enterprise Partnerships from April 2024.
The Budget said: “The government is committed to empowering democratically elected local leaders at every opportunity.”
The new full expensing 100% first year allowance will be introduced from 1 April 2023 until 31 March 2026. This means that companies across the UK will be able to write off the full cost of qualifying main rate plant and machinery investment in the year of investment.
The annual tax-free allowance for pensions will increase from £40,000 to £60,000.
The £1.07m lifetime allowance will be scrapped completely. This is the maximum amount of tax relievable pension savings an individual can benefit from over the course of their lifetime.
If you’re a Bristol Creative Industries member and you’d like to share your view on Budget 2023, email Dan.
Bristol Creative Industries is the membership network that supports the region's creative sector to learn, grow and connect, driven by the common belief that we can achieve more collectively than alone.
