A recent HM Revenue & Customs (HMRC) Policy Paper on administrative changes to creative industry tax reliefs includes modifications to Cultural Tax Reliefs, despite these being excluded from a November 2022 consultation.
Effective from 1 January 2024, charities will be required to use a new online ‘Information Form’ for claims related to Theatre Tax Relief, Orchestra Tax Relief, and Museums and Galleries Exhibition Tax Relief.
While the form aims to ease HMRC’s administrative load and combat abuse, it is likely to increase the administrative burden on charities.
Given the possible changes, it’s crucial to start preparing now to ensure a smooth transition come 1 January 2024.
You should always consult an accountant who is experienced in handling charity finances, but in the meantime, here are some practical steps to consider.
- Budget for additional resources: The new online ‘Information Form’ is likely to require more detailed information, which could necessitate additional staff hours or even hiring temporary staff to manage the process. These factors can be discounted if you already outsource your accounting practices, however.
- Review current record-keeping: Ensure that your existing financial records are comprehensive and up to date. This will make it easier to populate the new form and respond to any queries from HMRC.
- Consult with legal advisors: Given that the changes are aimed at tackling abuse, it would be prudent to consult with legal experts to ensure that your claims are compliant with the new regulations.
- Pilot testing: If possible, engage in pilot testing of the new form as soon as it becomes available. This will give you a clear understanding of the time and resources required to complete it.
- Cash flow planning: The new administrative requirements could delay the processing of claims. Ensure you have sufficient cash reserves to manage any delays in receiving tax reliefs.
- Engage with industry groups: Stay connected with industry associations and other charities. They can provide valuable insights into best practices and any lobbying efforts that might be underway to amend these changes.
- Training: Make sure your team is well-versed in the new requirements. Consider running internal workshops or engaging external experts, like accounting professionals, to provide training.
- Technology update: Ensure your accounting software is compatible with any new digital formats required by HMRC. If updates are needed, factor these costs into your budget. Again, if you outsource, you don’t need to worry about this issue.
- Regular monitoring: Once the new system is in place, regularly review the process to identify any bottlenecks or issues that need to be addressed.
- Contingency planning: Always have a backup plan. Whether it’s additional staffing or financial reserves, be prepared for unforeseen challenges.
By taking these steps, you’ll be better positioned to navigate the new requirements without undue stress, ensuring that you continue to maximise the benefits of Cultural Tax Reliefs for your organisation.
It is always important to consult with your financial adviser and accountant on these matters as they can advise on the best strategies to ensure your relief claims are accepted.
Speak to one of our team if you are worried about future regulatory or tax relief changes.