Corporation Tax
Rate of tax
The Corporation Tax rate is unchanged at 25% for companies with profits over £250,000. The ‘small profits rate’ remains 19% for companies with profits of up to £50,000. Between £50,000 and £250,000 there is a tapering calculation that produces an effective marginal rate of 26.5% on profits between these limits, but an average rate on all profits of between 19% and 25%. The limits are divided between companies that have been under common control at any time in the previous 12 months, whether UK resident or not.
Capital allowances for plant and machinery
In 2023, ‘full expensing’ (100% relief for the cost in the year of purchase) was introduced for most plant and machinery. It is not currently available to companies that buy plant to lease out to other businesses. The Chancellor announced that ‘the Government will seek to extend full expensing to leased assets ‘when fiscal conditions allow’ and will publish draft legislation shortly.
Film tax reliefs
The government is ‘modernising and simplifying’ the audio-visual creative tax reliefs, namely: Film Tax Relief (FTR); High-End TV Tax Relief (HETV); Animation Tax Relief (ATR); Children’s TV Tax Relief (CTR) and Video Games Tax Relief (VGTR).
Under the current schemes, relief is given by way of an additional deduction from profits or surrendering a loss for a tax credit. The FTR, HETV, ATR and CTR are to be replaced by a new Audio-Visual Expenditure Credit (AVEC) regime. VGTR is being replaced by a new Video Games Expenditure Credit (VGEC). There are transitional rules to cover the timing of the change from one regime to the other.
It was previously announced that animation and children’s TV will qualify for an AVEC credit rate of 39%, rather than the 34% available for films, high-end television and under the VGEC. At the Budget, it was announced that films which meet the qualifying criteria for an ‘independent film’ will be eligible for an Independent Film Tax Credit (IFTC) of 53%.
The higher rate is available on expenditure incurred from 1 April 2024, for films which commence principal photography on or after 1 April 2024. Claims can be made from 1 April 2025.
To qualify for the IFTC, a film must pass a new test administered by the British Film Institute. It is expected this will require that either key talent on the film, such as the director and writer, must be from the UK, or the film must be an international co-production.
Cultural reliefs
Companies involved in certain cultural activities are eligible for tax relief, whereby their qualifying expenditure is enhanced for tax purposes by a specified percentage, thus reducing taxable profits. If they are loss-making, the loss may be surrendered to HMRC in exchange for a payable tax credit.
The percentage enhancements were increased during the pandemic to 45% (for non-touring productions) and 50% (for touring productions and all orchestra productions), but were due to begin to taper down to 30% and 35% in April 2025. Instead, from 1 April 2025, the rates of enhanced expenditure for Theatre Tax Relief, Orchestra Tax Relief and Museums & Galleries Exhibition Tax Relief will be permanently set at 40% and 45%, representing a five percentage point reduction on the current enhancements.