PFS What's new bulletin - September I

TAXATION AND TRUSTS

 

Creative industries tax relief statistics and latest update on new rules (AF1, AF2, JO3, RO3)

The creative industries’ tax reliefs for film, high-end television, animation, children’s television, video games, theatre, orchestra, and museums and galleries exhibitions. Statistics on claims relating to the financial years up to 31 March 2024

Statistics

There are eight creative industry tax reliefs covering film, animation, high-end television, children’s television, video games, theatre, orchestra and museums and galleries. Within these eight reliefs, there are five audio-visual reliefs: Film tax relief, animation tax relief (ATR), high-end television tax relief (HETV tax relief), children’s television tax relief (CTR) and video games tax relief (VGTR). 

The company tax year, known as the financial year, starts on 1 April. These statistics provide information on the number and value of claims for the five audio-visual reliefs, Film tax relief, HETV tax relief, ATR, CTR and VGTR, as well as for Theatre tax relief (TTR), Orchestra tax relief (OTR), and Museums and Galleries Exhibition tax relief (MGETR), relating to accounting periods ending in the financial year to 31 March 2024.

The five audio-visual tax reliefs (Film tax relief, HETV tax relief, CTR, ATR and VGTR) are being phased out and will be replaced by expenditure credits, Audio-Visual Expenditure Credits (AVEC) and Video Game Expenditure Credits (VGEC). During the transitional period, companies may choose whether to claim for the tax reliefs or the new expenditure credits for their current productions. However, productions that commenced on or after 1 April 2025 must claim under the expenditure credits, and all productions must claim the expenditure credits from 1 April 2027.

A total of £2.4 billion of relief was paid out in relation to financial year to 31 March 2024, across all the creative industries tax reliefs and expenditure credits. This is an increase from £2.19 billion in relation to the financial year to 31 March 2023. 

There were modest increases in relief paid across most reliefs, with the largest proportional rises relating to TTR and CTR, and a small decrease in the value of Film tax relief paid out. For claims relating to the financial year to 31 March 2024, HETV tax relief accounted for nearly half (46%) of the total amount paid out and Film tax relief accounted for 22% of the total. This is similar to the previous year’s results.

AVEC and VGEC. Companies claiming for productions under Film tax relief, HETV tax relief, CTR and ATR have been able to claim under AVEC in relation to expenditure incurred from 1 January 2024. New productions have had to be claimed under AVEC from 1 April 2025, and all productions must claim under AVEC from 1 April 2027. Film tax relief, HETV tax relief, CTR and ATR will cease on 1 April 2027. The same transitional dates apply to the transition from VGTR to VGEC. VGTR will cease on 1 April 2027. 

The qualifying criteria and other rules for the current audio-visual reliefs have mostly been carried across into AVEC and VGEC unchanged, including the 80% cap on qualifying expenditure. Qualifying expenditure is still be calculated on a cumulative basis. Under the current schemes, relief is given by way of an additional deduction from profits or surrendering a loss for a tax credit. Under AVEC and VGEC, companies instead receive an above the line tax credit based on qualifying expenditure. This is taxable. AVEC also introduces a new minimum slot length for HETV programmes of 20 minutes, on an episode-by-episode basis, and a definition for documentary programmes. Qualifying expenditure for both AVEC and VGEC is the same as the definition used in the current film and TV reliefs — expenditure that is ‘used or consumed in the UK’. The subcontracting cap in place for VGTR has been removed for VGEC.

Only a small number of AVEC and VGEC claims relate to the financial year ended 31 March 2024, so HMRC has not presented these separately from tax relief claims. In next year’s publication, for the financial year ended 31 March 2025, HMRC expects to have received sufficient claims across all schemes to present data on AVEC, VGEC, and the tax reliefs, separately.

Film tax relief allows qualifying film production companies to make a deduction in their taxable profits or to surrender a loss for a payable tax credit. A company may make several tax relief claims for a film during the production process. A claim may cover several films. Since Film tax relief was introduced in 2007, companies have made claims for 5,805 films and £6,438 million has been paid out.

There were 960 claims made for Film tax relief in relation to the financial year to 31 March 2024, totalling £534 million of relief paid out. This is a 3% decrease in the amount of relief paid compared with the previous year, though the number of claims increased by 9%. The decrease is mainly due to a fall in the amount paid out relating to high-value claims (over £5 million).

Prior to the financial year to 31 March 2021, the number of claims had increased steadily year on year. There was a steep fall in both claims and relief paid in relation to the financial year to 31 March 2021 as a result of the Covid-19 pandemic. Though Film tax relief claims have since increased, they have not yet reached pre-Covid levels. This is partly due to the number of films produced for streaming services, which usually claim HETV tax relief rather than Film tax relief. This trend may change in future years as the number of AVEC claims increases, which requires productions with both a theatrical release and a broadcast release to claim AVEC as films. The introduction of Independent Film Tax Credit (IFTC) element of AVEC is also expected to increase the relief paid on film productions in future years. Data on claims for IFTC will first be available in the 2026 edition of these statistics, as claims for this relief could not be made prior to April 2025.

Of all claims made in relation to the financial year to 31 March 2024, 64% were for £100,000 or less. The proportion remains the same (64%) as the previous year. Despite only 2% of claims relating to the financial year to 31 March 2024 being for over £5 million, these accounted for 61% of the total amount paid. 

HETV tax relief allows qualifying production companies to make a deduction in their taxable profits or to surrender a loss for a payable tax credit. A company may make several tax relief claims for a programme during the production process. A claim may cover several programmes. Since HETV tax relief was introduced in 2013, companies have made claims for 1,650 programmes and £5,053 million has been paid out.

There were 685 claims made for HETV tax relief in relation to the financial year to 31 March 2024, totalling £1.110 million of relief. This is an increase of 3% from the previous year. The amount of HETV tax relief paid out remains at record levels following a substantial increase in the value of HETV relief in recent years due to large amounts of inward investment and an increase in feature length films created for streaming services, many of which claim HETV tax relief instead of Film tax relief. 

For claims relating to the financial year to 31 March 2024, 43% were for £250,000 or less. However, these only accounted for 2% of the total amount paid. High-value claims (over £2 million) accounted for more than three-quarters of the total amount paid. This proportion is similar to the previous year. 

ATR allows qualifying animation companies to make a deduction in their taxable profits or to surrender a loss for a payable tax credit. A company may make several tax relief claims for a programme during the production process. A claim may cover several programmes. Since ATR was introduced in 2013, companies have made claims for 645 programmes and £199 million has been paid out.

There were 120 claims made for ATR in relation to the financial year to 31 March 2024, totalling £33 million of relief paid out. Both the number and value of claims have increased  in recent years. 

For claims relating to the financial year to 31 March 2024, 33% were for values of over £250,000. This is an increase of 9% compared to the previous year. These claims accounted for 80% of the total amount of relief paid. 

CTR allows qualifying companies to make a deduction in their taxable profits or to surrender a loss for a payable tax credit. CTR is an extension of the high-end television and animation reliefs, but is specifically aimed at the producers of children’s television programmes. Since CTR was introduced in 2015, companies have made claims for 725 programmes and £209 million has been paid out.

There were 90 claims made for CTR in relation to the financial year to 31 March 2024, totalling £56 million in relief paid out. Both the number and value of claims for CTR have remained steady in recent years. 

Only 18% of the claims made in relation to the financial year to 31 March 2024 were for amounts over £500,000, but these accounted for 84% of the total amount of relief. The large increase in amount paid compared to the previous year is driven by an increase in the number of high-budget claims. 

VGTR allows qualifying video games companies to make a deduction in their taxable profits or to surrender a loss for a payable tax credit. A company may make several tax relief claims for a game during the production process. A claim may cover several games. Since VGTR was introduced in 2014, companies have made claims for 3,165 games and £1,837 million has been paid out.

There were 560 claims made for VGTR in relation to the financial year to 31 March 2024, totalling £327 million of relief paid out. The amount of relief increased by 12% compared with the previous year. This is mainly due to a rise in high-value claims (£1 million to £2 million). VGTR was not as severely impacted by the COVID-19 pandemic as other creative sector reliefs. VGTR has grown consistently in both the number and value of claims since its introduction.

The majority of claims relating to the financial year to 31 March 2024 tended to be for smaller amounts, with 41% of all claims being for £50,000 or less. However, these claims only represent 2% of the total amount of relief paid. Claims over £500,000 account for 81% of the total amount of relief paid. This proportion is similar to the previous year.

TTR was introduced in September 2014. Unlike the audio-visual reliefs, theatrical production companies are not required to pass a cultural test to be eligible to claim tax relief. A theatre production company may make several claims during the production process. A claim may cover several productions. Since TTR was introduced, companies have made claims in relation to 29,025 productions and £892 million has been paid out.

There were 1,380 claims made for TTR in relation to the financial year to 31 March 2024, totalling £261 million in relief paid out. This is a 15% increase in claims and a 65% increase in relief paid compared to the previous year. 

In 2021, the Government introduced a temporary increase in the relief rates of TTR, OTR and MGETR, for productions which commenced production on or after 27 October 2021. This increased the tax credit rate for touring productions to 50% and non-touring productions to 45%, from 25% and 20% respectively, more than doubling the value of relief available. As a result, the value of TTR relief relating to the financial year to 31 March 2024 has increased substantially, with the majority of claims in the financial year to 31 March 2024 now applying the increased rates of relief, which did not previously affect all productions. The increased relief rates may have also contributed to an increase in the number of claims, which are now 37% higher than pre-COVID levels.

In Spring Budget 2023, the temporary rate increase was extended for a further two years. The higher rates also apply to OTR and MGETR. The increase in rates was made permanent at the 2024 Spring Budget, at a rate of 45% for touring and 40% for non-touring productions from 1 April 2025. 

The highest proportion of claims made in relation to the financial year to 31 March 2024 is for smaller amounts, with 23% of all claims being for £10,000 or less. In comparison, claims of over £500,000 represented just 8% of the claims made but 65% of the total amount of relief paid. 

OTR was introduced in April 2016. Orchestral production companies are not required to pass a cultural test to be eligible to claim tax relief. An orchestral production company may make a number of claims, receiving payments at stages throughout the production process. A claim may cover several productions. If a company has made a concert series election covering multiple productions, then the series of concerts is treated as a single production. Since OTR was introduced, companies have made claims for 4,475 productions and £164 million has been paid out.

There were 260 claims made for OTR in relation to the financial year to 31 March 2024, totalling £50 million in relief paid out. This is a 39% increase in productions compared to the previous year, and the number of claims is now above pre-Covid levels, although the number of productions has not reached pre-COVID levels. The increase in OTR relief rates has contributed to the increase. 

Claims of £5,000 or less represented 27% of the claims relating to the financial year to 31 March 2024. While only 11% of all claims were for amounts over £250,000, these represent 75% of the amount of relief paid. 

MGETR was introduced in April 2017. Exhibitions are not required to pass a cultural test to be eligible to claim tax relief. Relief is only available to charitable companies, and to subsidiaries of charities and local authorities. Tax credits are capped per exhibition at a maximum of £100,000 (touring) or £80,000 (non-touring). A museum or gallery may make a number of claims, receiving payments at stages throughout the exhibition process. A claim may cover several exhibitions. Since MGETR was introduced, companies have made claims for 11,145 exhibitions and £115 million has been paid out.

There were 270 claims made for MGETR in relation to the financial year to 31 March 2024, totalling £28 million in relief paid out. This represents an increase in the number of claims and productions, and the amount of relief paid compared to the previous year. The increase in relief paid was in part due to the increase in relief rates for MGETR. 

The highest proportion of claims made in relation to the financial year to 31 March 2024 is for smaller amounts, with 31% of all claims being for £25,000 or less. Only 13% of claims were for over £200,000, but these accounted for 54% of the total amount of relief paid.).

This is an annual release, and the next release is planned to be in summer 2026. In this publication, HMRC has included claims made for AVEC and VGEC for the first time, as AVEC and VGEC can be claimed on expenditure incurred since 1 January 2024. As the existing tax reliefs (for films, HETV, children’s TV, animation and video games) will continue until 31 March 2027, the publication will cover claims for both the tax reliefs and the expenditure credits that will replace them.

All figures are provided on an accruals basis. This means that claims are allocated to the financial year in which the claimant’s accounting period ends. There is a lag in the data as companies have a year after the end of their accounting period to file their corporation tax return, and a further year to make, withdraw or amend a claim for the creative industries tax reliefs.

 

 

 

 

INVESTMENT PLANNING

NS&I rate change (AF4, FA7, LP2, RO2)

NS&I has announced an immediate decrease to the interest rates for the one year term of British Savings Bonds (aka Guaranteed Growth Bonds and Guaranteed Income Bonds):

Product	Term	Old rate	New rate from 2 September
Guaranteed Growth Bonds
	1 year	4.18% gross/AER	4.04% gross/AER
Guaranteed Income Bonds
	1 year	4.11% gross/4.18% AER	3.97% gross/4.04% AER

Before NS&I’s announcement, the best one year fixed rate in the market according to Moneyfacts was 4.50% AER and 4.31% monthly (4.40% AER). 

The nearest equivalent gilts are Treasury 1.50% 2027 (TG26 maturing 22 July 2026), and Treasury 0.375% 2026 (T26A maturing 22 October 2026) which have net redemption yields as follows:

Tax rate	0%		20%		40%		45%
Gilt	TG26	T26A	TG26	T26A	TG26	T26A	TG26	T26A
Net redemption yield	3.89%	3.73%	3.59%	3.65%	3.29%	3.57%	3.21%	3.56%
Gross equivalent	3.89%	3.73%	4.49%	4.56%	5.48%	5.96%	5.83%	6.46%

Source: Yieldgimp.com

Comment

The Bank of England’s next rate decision meeting is on 18 September. At present the expectation is that there will be no change to the 4% base (bank) rate. 

 

 

 

30-year yields (AF4, FA7, LP2, RO2)

Long-dated Government bonds in the US, UK and Germany, which are hitting yields not seen for many years

Source: Investing.com

30-year Government bond yields provide a market view on long term economic prospects and, in particular, the outlook for inflation. They are influenced by central banks’ actions on short term rates only to the extent that there is a read across to inflation management and economic credibility.

In the era(s) of quantitative easing (QE) central banks did have a greater influence on long term bond yields as they were price-insensitive buyers, pushing down yields. Now that QE has morphed into QT (quantitative tightening), they are having the opposite effect, albeit only marginally as central banks have been slow to run down their large portfolios.

As the graph shows, 30-year yields have on a sharp upward trend in the US UK and Germany since the end of 2021. The same would be true for Japan, were it to be added to the graph. The move has been due to higher inflation and, increasingly, the growth of government debt.  

In the UK and US, the Government reaction has been to focus fresh borrowing at the short end of the bond market or through treasury bills. That has the benefit of keeping interest costs down – the yield gap between two-year and 30-year bonds is about 1.6% in the UK and 1.25% across the Atlantic. However, short term debt needs much more frequent refinancing, which brings with it the danger that the interest costs could be more volatile in the medium term.  

In the US, 30-year Treasury bond yields are the benchmark against which many mortgages are set – about 90% of US homes loans are 30-year fixed rate. Thus if the Federal Reserve cuts its Bank Rate, this has almost no impact on existing borrowers and potentially a similar non-effect for new borrowers. When Donald Trump says, “Once we have a majority [at the Federal Reserve], housing is going to swing, and it’s going to be great”, he seems to be ignoring that 30-year reality. Meanwhile, US mortgage rates are 6.6%, having been churning in a 6%-7% band for most of the last three years.

Comment

At over 5.6% in early trading, 30-year UK gilt yields touched their highest point in recent months on 27 August and were very close to levels last seen in 1998. The Autumn Budget will be a major short term factor in whether they move any higher. 

 

PENSIONS

 

HMRC Pension Scheme Newsletter 172 – August 2025

(AF8, FA2, JO5, RO4)

 Pension Scheme Newsletter 172  covers the following:

 

• Personal Pension Relief — evidence requirement changes
• Public service pension remedy — mandatory scheme pays deadline for active and deferred members
• Lifetime Allowance protections and enhancements — authenticated look up service — how you can help us
• Relief at source

 

Areas of particular interest:

 

Personal Pension Relief – evidence requirement changes (see also separate item below)

 

For higher rate and additional rate taxpayers it is possible to make claims for the additional tax relief due on personal pensions contributions directly via HMRC.

 

From 1 September 2025, HMRC are lowering the threshold for requiring evidence in support of new requests for higher rate or additional rate relief claims to be given through an individual’s tax code.

 

This means some client’s may be asked to provide evidence where it would not previously have been required.

 

HMRC do not anticipate any changes to provider processes, as they already provide members with the necessary information to support their claims. However, these updates may lead to increased enquiries as individuals adjust to the new requirements.

 

 

Public service pension remedy (McCloud) – mandatory scheme pays deadline for active and deferred members

 

HMRC are aware that they are delays in some schemes issuing statements relating to the public service pension remedy. So that those members do not lose out, ministers have now agreed to move the mandatory scheme pays deadline for active members to 6 July 2027 to align with the deadline for pensioner members.

 

This will apply to all members that have already submitted a scheme pays election to HMRC as part of the public service pensions remedy for the tax years 2019 to 2020 through to 2022 to 2023 where they missed the original deadline for mandatory scheme pays of 6 July 2025. 

 

HMRC intend to include provisions to this effect in our next set of regulations and expect all remedy scheme pays elections to be treated as mandatory until the new, later date.  HM Treasury have agreed to extending the deadline before the regulations have been enacted and so schemes should treat the deadline as 6 July 2027 from now on.

 

 

Claiming tax relief on personal pension contributions – an update

(AF8, FA2, JO5, RO4)

If an individual completes a self-assessment tax return, they must claim tax relief on their pension contributions through their tax return (for the current tax year and any previous years).

Where an individual doesn’t complete a self-assessment tax return they can use the alternative HMRC service if they are claiming tax relief through their tax code for just the current tax year.

 

Previously HMRC only required proof of contributions where they exceeded £10,000 in a tax year.  The updated guidance now requires proof for all contributions.  In another change, HMRC will no longer accept telephone claims.  All claims need to be either via the online service or made in writing.

 

Who can claim

 

To be eligible to claim tax relief an individual must be:

 

·         a basic rate taxpayer that pays into a workplace pension, but the employer does not or will no longer claim tax relief;

·         a basic rate taxpayer that pays a lump sum into a personal or workplace pension that is not under a net pay scheme;

·         a higher rate taxpayer or an intermediate rate taxpayer that pays into a personal pension or workplace pension that operates under relief at source.

 

Whilst the guidance does not explicitly refer to additional rate, advanced or top rate taxpayers we see no reason why they could not also use this service where they do not already complete a tax return.

 

 

What the individual will need

 

To claim tax relief on their personal and workplace pension payments, they’ll need to know:

 

·         their National Insurance number;

·         the type of pension;

·         the name of the pension provider;

·         the net amount of pension contributions for each tax year they’re claiming for;

·         their payroll number or reference number.

 

The individual will need to upload or send proof of payments made for each tax year they’re claiming for.  The proof can be in the form of a letter or statement fom the pension provider, or a payslip from the individual’s employer. It must include

 

·         the individual’s full name

·         details of contributions paid and the tax year they relate to

·         evidence that you have received 20% tax relief automatically where relevant.

 

 

How to claim

 

Claim online

 

The individual will need to sign in with their Government Gateway user ID and password (if they do not have a user ID, they can create one when they first try to sign in).

 

The individual can save their progress and come back later.

 

Claim now

 

Claim by post 

 

The individual must send HMRC a letter if they are:

 

·         unable to claim online;

·         an agent acting on behalf of a client.

 

They’ll need to include all the information from the ‘what the individual will need’ section in their letter.

 

 

After the individual has claimed

 

HMRC says that it will review the claim and contact the individual within 28 working days.

 

Amending a claim

 

Where a claim needs to be amended for a tax year the individual will need to provided all the information again – ie they will replace the existing claim with a new one.  Changes can be made online via the Government Gateway as above or via a letter.