Creative Industries Tax Incentives

//Creative Industries Tax Incentives

Creative Industries Tax Incentives

If you work in the creative industries and pay Corporation Tax, you could be eligible for Creative industry tax relief. In 2013, the Government officially recognised the essential role creative industries play in the UK economy by introducing a range of tax reliefs. 

There are a range of financial incentives for qualifying activities in creative industries that aim to encourage long-term investment in creative industries. The scheme achieved its aim, and the UK’s creative industries are expected to grow faster than the rest of the UK economy over the next 10 years.

There are eight categories of tax relief, all of which have their own qualifying conditions.

The reliefs are considered to be generous, and in 2018/19 more than £1bn was paid to qualifying companies. However, some organisations are unaware that they can claim them, particularly charities that think they’re not eligible because they are exempt from paying Corporation Tax. 

What are the current creative industry tax reliefs?

The categories of reliefs are:

  • Film 
  • TV 
  • Video Games
  • Theatre
  • Children’s TV
  • Animation
  • Orchestra
  • Museums and Galleries

Film Tax Relief (FTR) is the most popular, accounting for more than half of the amount claimed over the past three years.

How do the creative industry tax reliefs work?

Despite having different qualifying conditions, each category of relief works similarly. Qualifying productions are treated as a deemed trade for tax purposes and companies receive an additional deduction based on production costs.

The additional deduction reduces your company’s taxable profit, or if you’re a charity, your surplus. If the reduction results in or adds to a loss, you can surrender the additional loss to the HMRC for a payable tax credit. Depending on the type of relief, you’ll be paid a rate between 20% and 25% in tax credits.

There is a common requirement for the film, TV, children’s TV, video games and animation categories to prove that productions are British. Known as the cultural test, to qualify for relief productions must be culturally British. There are also rules around where the money is spent and productions being available to the public.

Film Tax Relief requirements

Your programme must pass the cultural test or be considered an official co-production, and:

  • Be intended for broadcast
  • Be a comedy, drama or documentary over 30 minutes long
  • At least 10% of the production costs are UK based
  • Has minimum production costs of £1m p/h

Video Games Tax Relief 

Your game must:

  • Be British
  • Be made for the British or global market
  • Spend at least 25% on goods and services from the EEA

High-end TV and Children’s TV Relief

Your programme must pass the cultural test or be considered an official co-production, and:

  • Is intended for theatrical release
  • At least 10% of the production costs are UK based

For children’s TV, there is an additional requirement that your programme’s primary audience should be under the age of 15.

Animation Tax Relief

Your animated programme must:

  • Pass the cultural test
  • Be made in the EEA
  • Spend at least 51% on animation
  • At least 10% of the production costs are UK based

Theatre Tax Relief

To qualify, your production must:

  • Be performed
  • Be for a live audience of paying members of the general public or for educational purposes
  • Spend at least 25% on goods and services from the EEA

How much can I claim?

Once you’ve worked out what your qualifying or ‘enhanceable’ expenditure, you can claim different amounts depending on whether your company is in profit or making a loss.

If your company is in profit, you can claim 100% of the qualifying expenditure as an additional deduction against your taxable profits.

If your company is making a loss, you can claim 25% of the loss surrendered as a tax credit, up to the amount of the qualifying expenditure.

How do I make a claim?

If you think you’re eligible for one of the creative industry tax reliefs, you can make a claim to HMRC on your Corporation Tax return. You can also make interim claims while a production is being made, then a final claim once it’s finished. In the current pandemic, you may also be able to defer some of your tax payments.

If you work in the creative industries, Primotax can help you claim the tax reliefs and credits you’re entitled to. Tax calculations for creative industry reliefs can be complicated. We’ve got the expertise to ensure you claim the correct amount and reduce the risk of an inquiry from HMRC.

If you are a creative business and need some support with maximising your tax claims, get in touch today to book an appointment with one of our specialist team members.

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