Creative Industries & Tax Relief – The Facts

Author

Thomas Slipanczewski

A tax adviser, Thomas joined ETC Tax in September 2018.

Creative Industries Tax Relief – An Introduction for UK Firms


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:

  • Film
  • High-end tv and children’s television programmes
  • Animation programmes
  • Video games
  • Theatrical productions
  • Orchestral concerts
  • Museum or gallery exhibitions

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.

Tax Relief – High-end TV & Children’s Television Programmes

Conditions

To successfully qualify for the high-end tv and children’s television programmes relief, the programme(s) must:

  • Be intended for broadcast and in a slot greater than 30 minutes;
  • Be a drama, comedy or documentary;
  • Made in the EEA;
  • Include at least 10% of the total production costs relate to activities in the UK; and,
  • The average qualifying production costs per hour of production length isn’t less than £1 million per hour.
  • Where it is a children’s television programme, the primary audience must be expected to be under the age of 15.

The following programmes are excluded:

  • Advertisements;
  • News, current affairs or discussion;
  • Quizzes, game shows or similar;
  • Includes competition or contest;
  • Includes the broadcast of a live event, i.e. sports; and,
  • Is for training purposes.

The Claim – TV & Enhanceable Expenditure

A claim can be made to enhance the qualifying expenditure (‘the enhanceable expenditure’) by the lesser of:

  • Qualifying UK expenditure; Or,
  • 80% of the total qualifying expenditure.

Once the qualifying expenditure has been calculated, the company can claim either:

  • 100% of the enhanceable expenditure as an additional deduction in calculating the taxable profits of the company (where the company is profitable);
  • 25% of the loss surrendered as a repayable tax credit, up to the amount of the enhanceable expenditure (where the company is loss making).

Video Games Tax Relief

Conditions

To successfully qualify for video games tax relief, game must:

  • Be British;
  • Intended for supply; and,
  • At least 25% of the core expenditure is incurred in the EEA.

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:

  • Qualifying EEA expenditure; Or,
  • 80% of the total qualifying expenditure.

Once the qualifying expenditure has been calculated, the company can claim either:

  • 100% of the enhanceable expenditure as an additional deduction in calculating the taxable profits of the company (where the company is profitable);
  • 25% of the loss surrendered as a repayable tax credit, up to the amount of the enhanceable expenditure (where the company is loss making).

Animation Tax Relief

Conditions

To successfully qualify for animation tax relief, the programme(s) must:

  • Be made in the EEA;
  • Passes the cultural test;
  • at least 51% of the total core expenditure is on animation; and,
  • at least 10% of the total production costs relate to activities in the UK.

The following programmes are excluded from the relief:

  • Advertisements or promotional programmes;
  • News, current affairs or discussion;
  • Quizzes, game shows or similar;
  • Includes competition or contest;
  • Includes the broadcast of a live event, i.e. sports; and,
  • Is for training purposes.

The Claim – Animation & Enhanceable Expenditure

A claim can be made to enhance the qualifying expenditure (‘the enhanceable expenditure’) by the lesser of:

  • Qualifying UK expenditure; Or,
  • 80% of the total qualifying expenditure.

Once the qualifying expenditure has been calculated, the company can claim either:

  • 100% of the enhanceable expenditure as an additional deduction in calculating the taxable profits of the company (where the company is profitable);
  • 25% of the loss surrendered as a repayable tax credit, up to the amount of the enhanceable expenditure (where the company is loss making).

Theatre Tax Relief

Conditions

To successfully qualify for theatre tax relief, the theatre company must:

  • Put on a qualifying theatrical production;
  • Primarily focus on carrying on a production before a live audience of paying members of the general public, or a production for educational purposes; and,
  • Has a minimum expenditure of 25% within the EEA.

Productions including the following are excluded from the relief:

  • Advertisements or promotions;
  • Competition or contest;
  • Includes the use of a wild animal;
  • Sexual content; and
  • Recording is a main objective of the production.

The Claim – Theatre & Enhanceable Expenditure

A claim can be made to enhance the qualifying expenditure (‘the enhanceable expenditure’) by the lesser of:

  • Qualifying EEA expenditure; Or,
  • 80% of the total qualifying expenditure.

Once the qualifying expenditure has been calculated, the company can claim either:

  • 100% of the enhanceable expenditure as an additional deduction in calculating the taxable profits of the company (where the company is profitable);
  • 25% for touring performances and 20% for non-touring performances of the loss surrendered as a repayable tax credit, up to the amount of the enhanceable expenditure (where the company is loss making).

Worked Example

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.

Tax Relief & Loss Making Business

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

Our Services

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.

 

 

 

 

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