April 6th saw the beginning of a new tax year. Our blog last week detailed some of the changes that we could expect, amongst them was a small decrease in Corporation Tax. But are you aware that there are a group of 7 Corporation Tax reliefs that apply specifically to the creative industries? They are similar in form to Research and Development (R&D) tax relief and include:
- Film Tax Relief (FTR)
- Animation Tax Relief (ATR)
- High-end Television Tax Relief (HTR)
- Video Games Tax Relief (VGTR)
- Children’s Television Tax Relief (CTR)
- Theatre Tax Relief (TTR)
- Orchestra Tax Relief (OTR)
How do they work?
They work quite simply (although they are not necessarily that simple to apply for!!), by allowing the company to claim a larger deduction.
And if the company is not making profits – it may even be able to claim a payable tax credit when calculating the tax profits. In a nutshell, they can allow for:
- An additional tax deduction (of up to 100% of enhanceable expenditure) or
- A payable tax rebate if the company is loss-making.
When the relief is calculated the things to remember are that:
- Core expenditure is the total spending on directly incurred costs of making the film, programme etc.
- For expenditure to qualify, it must be spending on goods and/or services that are used in the UK for FTR, HTR, CTR and ATR
- Or spending on goods and/or services sourced from within the EEA for VGTR, TTR and OTR
- You may not be able to combine creative tax reliefs with R&D Tax Credits (or other tax breaks)
Check out the precise definitions and track expenditure as you go.
Your company may be eligible for one or more of these reliefs, and you could qualify if your business is:
- Liable to Corporation Tax
- Directly involved in the production and development of one of the qualifying activities, in one of the creative industries listed above
HMRC have a simple, easy to follow, flowchart on their website to help you determine whether you are eligible to apply or not.
Your company will also have to pass a cultural test, but this does not apply to TTR or OTR.
The cultural test demands that your film, programme or video game must qualify as British made. This is a formal process and a certificate will be issued from BFI if your production meets the criteria.
Of course, the criteria vary for the different categories (e.g. a film and a video game do not have the same cultural requirements) but we can go through the T&C’s with you.
If you would like to find out more about these tax reliefs and whether they could apply to you, just give us a call.