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29 November 2019
Thomas Slipanczewski
The creative industries are a key part of the UK economy and the UK has sought to incentivise growth of these industries through a number of generous tax reliefs.
The tax reliefs fall into the following categories:
The Government’s figures show that over 2000 claims were made in 2018-19 and over £1bn was paid out in relief. Despite this, it is thought that there are many qualifying businesses missing out on the generous reliefs.
Conditions
To successfully qualify for the high-end tv and children’s television programmes relief, the programme(s) must:
The following programmes are excluded:
The Claim – TV & Enhanceable Expenditure
A claim can be made to enhance the qualifying expenditure (‘the enhanceable expenditure’) by the lesser of:
Once the qualifying expenditure has been calculated, the company can claim either:
Conditions
To successfully qualify for video games tax relief, game must:
Games that are created for advertisement, promotion or gambling are excluded from the relief.
The Claim – Video Games & Enhanceable Expenditure
A claim can be made to enhance the qualifying expenditure (‘the enhanceable expenditure’) by the lesser of:
Once the qualifying expenditure has been calculated, the company can claim either:
Conditions
To successfully qualify for animation tax relief, the programme(s) must:
The following programmes are excluded from the relief:
The Claim – Animation & Enhanceable Expenditure
A claim can be made to enhance the qualifying expenditure (‘the enhanceable expenditure’) by the lesser of:
Once the qualifying expenditure has been calculated, the company can claim either:
Conditions
To successfully qualify for theatre tax relief, the theatre company must:
Productions including the following are excluded from the relief:
The Claim – Theatre & Enhanceable Expenditure
A claim can be made to enhance the qualifying expenditure (‘the enhanceable expenditure’) by the lesser of:
Once the qualifying expenditure has been calculated, the company can claim either:
Please see a simplistic worked calculation of the benefits that video games tax relief could offer.
Profit Making Business
Where a qualifying video games tax relief business had income of £2m, had qualifying expenditure of £1m, but did not claim video games tax relief, the tax payable will be as follows:
Income | 2,000,000.00 | |||
Core Expenditure (All from the EEA) | 1,000,000.00 | – 1,000,000.00 | ||
Taxable Profit | 1,000,000.00 | |||
Tax Payable | 1,000,000.00 | x | 19% | 190,000.00 |
In comparison, where video games tax relief if claimed, the tax payable will be as follows:
Income | 2,000,000.00 | |||
Core Expenditure (All from the EEA) | 1,000,000.00 | – 1,000,000.00 | ||
Profit | 1,000,000.00 | |||
Enhanced Expenditure | 1,000,000.00 | x | 80% | – 800,000.00 |
Revised Taxable Profit | 200,000.00 | |||
Tax Payable | 200,000.00 | x | 19% | 38,000.00 |
Resultingly, the video games tax relief provides a tax saving of £152,000.
Where a qualifying video games tax relief business had income of Nil, had a surrenderable loss of £1.8m and claimed video games tax relief, the repayable tax credit will be as follows:
Income | Nil | |||
Core Expenditure (All from the EEA) | 1,000,000.00 | 1,000,000.00 | ||
Loss | – 1,000,000.00 | |||
Enhanced Expenditure | 1,000,000.00 | x | 80% | – 800,000.00 |
Revised Taxable Loss | – 1,800,000.00 | |||
Surrenderable Loss | 1,000,000.00 | + | 800,000 | – 1,800,000.00 |
Repayable Tax Credit | 1,800,000.00 | x | 25% | 450,000.00 |
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If you or your clients would like any further information on creative industries tax reliefs or would like to discuss whether you are potentially eligible, please get in touch.