The Chancellor’s Budget announced a generous increase to the rates of cash credit that museums, galleries, theatres and orchestras may claim on qualifying expenditure. RSM welcomes these measures as a much-needed boost to these sectors as they reopen their doors to the public.
Creative sector reliefs in the UK allow qualifying companies and charities to claim a cash credit on the costs of developing new productions or exhibitions. Three separate reliefs have been introduced over the course of the last few years: Theatre Tax Relief, Orchestra Tax Relief and, most recently, Museums and Galleries Exhibition Tax Relief.
Although administered through the tax regime, there is no requirement for organisations to be tax-paying. The availability of this unrestricted cash funding from HMRC has helped these sectors to invest in new content for a number of years. The original rules were already generous, so how will these new changes affect the sector?
The existing level of relief enables an unrestricted cash payment of between 16 per cent and 20 per cent of qualifying spend. The Autumn Budget introduces a temporary increase to these rates, substantially increasing the benefit for spend with immediate effect and then tapering the relief back down to original levels by 1 April 2024. This means that claimants can now obtain a cash benefit of 36 per cent to 40 per cent on qualifying spend, a very substantial boost to these sectors.
Museums and Galleries Exhibition Tax Relief was the only relief which had a sunset clause allowing HMRC to review the relief on 1 April 2022 and decide if it was operating as anticipated. This caused a great deal of uncertainty in the sector, so the welcome extension of the sunset clause to 1 April 2024 provides certainty and allows for the benefit to be budgeted for in current forecasts.
What should those in the sector be doing now? These reliefs are often poorly understood by both claimants and their advisors. Misconceptions as to who can claim are still widespread, as are misunderstandings as to what costs can be included and how complicated the claim process might be. Larger claimants have often benefited most, as they have more resources to understand the process, but the increase in rates mean that all companies and charities should be looking at these reliefs. Submitting a claim for a cash credit is often much less onerous than grant applications, and claimants should ensure they speak to the right people to ensure they get their full benefit entitlements.