Tax Relief for Creative Businesses
Whenever we talk about tax, some individuals may automatically think about the rich and the industrial businesses. However, today, we will be tackling creative industry tax reliefs and how is it related to the payable tax credit.
As mentioned above, creative industry tax relief is an eight corporation tax relief programme. It is implemented to provide tax incentives to promote culturally relevant productions in the creative sector such as; animation programmes, high-end television programmes, film production companies, video games, children’s television programmes, and other qualifying companies.
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To know more about the creative industry tax reliefs, read more below.
Creative Industries Tax Reliefs & Credits
The aforementioned definition of corporation tax directly involving creative industry tax relief has been favourable for those in the creative business sector because claiming tax relief also means reducing your business’ tax burdens, which is why it is also considered state aid.
Currently, tax relief programs will help promote culturally important creative sector productions in England to attract investments in UK productions. The Government will also help protect the vitality and capacity of creative skills.
For applications, a company must:
- Have an obligation for corporate tax,
- Direct involvement in promoting a qualification activity
- And in some instances, pass a cultural test.
In order to qualify the creative sector for tax relief, they must be legitimised first that they are British. To carry out the cultural legitimacy of the candidate and its culturally relevant productions, the Cultural Test must take place.
The qualifying companies shall file an interim certificate that will be recognised by the British Film Institute and will be awarded certification and will be allowed to claim tax relief.
Accessing Film Tax Relief
Film Production Companies (FPC) can claim up to 25% cash reimbursements on eligible film production expenditures within the UK.
Film tax exemption is available for qualifying British Film Institute if the maximum amounts of claims cannot exceed the amount allowed. The producer of the film must operate within UK corporation tax networks.
Theatre tax relief can be claimed on the lower of:
- 80% of the total core expenditure
- and the actual UK expenditure incurred.
The core expenditure refers to the total core expenditure of the film, including the total production costs. In order to be qualified, a film company must have 10% UK core expenditure.
Television Programmes Tax Reliefs
Television animation tax relief is available for qualifying UK core production expenditures at the lowest of 80% of the overall core budget or actual core.
There isn’t a maximum amount to claim.
Video Games Tax Relief
The video game tax credit provides up to 20 % of the production and development cost of the game. Game developers will get VGTR for any lower than 80% of core costs. EEA core spending.
Generally, video game taxes are available at less than 50% or more of the core UK / EEA core expenditure incurred.
However, the limit for the claim is not specified at all.
These refunds are available to businesses that develop and manufacture video games for distribution in the UK and abroad.
The Animation Tax Relief
As for the Animation Tax Relief, the total production costs relate to how the animation tax reliefs are calculated.
For starters, an animation programme must have at least 51% of its core expenditure. Additionally, the project must be intended for broadcast.
On top of it, the Animation Production Company must ensure that every activity from pre-production up to the final.
Children’s Television Tax Relief
Children’s programmes are a great hit for UK primary audience. Here the company responsible is the Children’s Television Production Company or CTPC, and they can claim tax relief amounting to 25% of qualifying expenditure.
Children’s program tax relief has no minimum expenditure requirement.
Innovation Tax Relief
In this sector, the primary company responsible for decision making is the Research & Development.
There are two criteria offered by R&D, and they are as follows:
- Small and Medium-sized Businesses – Tax Reliefs provide amounting to 230% tax deduction.
- Large companies – Research and Development Expenditure Credit (RDEC) of 13% for qualifying R&D expenditure. Often these reliefs are also collectively referred to as R&D tax credits.
Companies that spend money developing new products, processes, and services can also enjoy tax breaks. When investing your capital in innovation, you are eligible to receive either cash payments or corporation tax reductions if it is eligible.
Theatre Tax Relief
Production companies may recover the portion of their cost for producing dramatised theatrical production. Often these play-based plays, operas, ballets, and other theatrical performances are live performances, and other theatres often perform them. The majority of the performances were aimed at an educated audience.
To be qualified, a high proportion of the performances must be for paying members of the general public of the UK and be provided for educational purposes.
At least 25% of the core expenditure is used on goods/services provided within the European Economic Area or EEA.
Orchestra Tax Relief
This relief is available to anyone who performs qualified orchestral concerts. Since concerts are required to live and perform with a live orchestra, an ensemble of 12 instruments, the core expenditure for production is considered a sum derived from production but excludes expenditure on performance.
Museums and Galleries Exhibition Tax Relief
Finally, Museums and Galleries Exhibition Tax Relief is the eighth sector which can claim creative industry tax relief. It is available to primary or secondary qualifying museums and gallery exhibitions that can develop and operate a show in one location and are responsible for the removal and closing of the exhibition.
The eligible expenditure criteria for the claims process are the following:
- The exhibition being organised is in connection with a competition
- The primary motive is selling any item on display or advertising and promoting any goods or services
- Less than 25% of the core expenditure incurred is European Economic Area expenditure.
Minimum UK Spending Requirement
The yearly minimum cost required for qualifying production costs varies based on your tax exemption. The cost of delivering a television programme for children should cover almost 10% of its cost in England.
Game designers must spend at least 25% of their cost on UK or EEA state’s qualifying production expenditures. The UK’s qualifying production expenditure includes expenses incurred by production operations that have taken place in England, namely the production process, including the production of film animations, design and production, and after production.
Frequently Asked Questions
How Much Can I Claim?
The company provides supplemental tax credits to the company to calculate the profits/losses. It will either limit taxable profits or increase losses that can be claimed as tax credits. The extra deduction is the lower 80% of the core costs associated with producing / exhibition / or EEAS core expenditure.
What is HMRC Creative Industry Tax Unit
The tax department works on corporate and creative industries, which can be exempt from creative industries’ tax breaks. Questions about tax relief are urged on this website. E-mail [email protected] Telephone: 013 444 441 – Select option 4 (Creative Industry Tax Unit). Learn about creative industry exemptions from corporations’ tax.