A quick guide to... Creative Industry Tax Relief

The UK is now a global leader in creative industries, producing world-class films, television programmes, theatre productions, and video games that have helped build a creative economy that now employs millions of people. You only need to look as far as British dramas, such as Downtown Abbey and Sherlock, which have triumphed with audiences overseas.

The UK's creative industries contribute £91.8bn to the UK economy, and figures show the sector as a whole is growing at double the rate of UK economy.

The Government has been supporting the UK’s creative industries with Creative Industry Tax Relief (CITR) for several years now in a drive to ensure the UK remains a hotbed of creative talent and world-leading creative companies. However, despite a 27% increase in the tax relief paid out by HMRC, awareness of CITR and who is eligible to apply remains relatively low.

CITR allows companies to claim an enhanced deduction, or in certain circumstances a payable tax credit, when calculating their taxable profits.

Some aspects of CITR require formal cultural certification, which means companies must undergo a cultural test with the BFI (this requires the signature of a solicitor). This test is an objective assessment of the cultural attributes of a film, television programme or game, ensuring that it is culturally British or qualifies as an official co-production. Working on a points-based system, it measures value in the following areas:

• Cultural content
• Cultural contribution
• Cultural hubs
• Cultural practitioners

Creative Industry Tax Relief is broken down into eight main areas (of which the first seven are touched upon here)...

Film Tax Relief

Last year there were 630 claims totalling £415 million of Film Tax Relief (FTR) in the UK. Since its introduction in 2007, a total of £2.3 billion has been paid out by HMRC.

FTR enables production companies producing culturally British films to claim either an additional tax deduction of 100% of enhanceable expenditure or if a loss is surrendered; 25% of the loss up to the amount of enhanceable expenditure.

Your company can claim tax relief on a film if:

• It passes the cultural test
• Is intended for theoretical release and,
• At least 10% of the total production costs relate to activities in the UK

Animation Tax Relief

Since it was introduced in 2013, 105 programmes have claimed Animation Tax Relief (ATR) and a total of £29 million has been paid out.

Your company can claim ATR provided the animation programme:

• Passes the cultural test
• Is intended for broadcast
• At least 51% of the total core expenditure is on animation
• At least 10% of the total production costs relate to activities in the UK

High-end Television Tax Relief

Introduced in April 2013, High-end Television Relief (HTR) is aimed at promoting the sustainable production of high-end television programmes in the UK.

Like FTR and ATR it allows qualifying companies to claim an enhanced tax deduction or receive a tax credit is the loss is surrendered.

Your company can claim HTR on a television programme if:

• It passes the cultural test or qualifies as an official co-production
• It is intended for broadcast
• The programme is a drama, comedy or documentary
• At least 10% of the total production costs relate to activities in the UK
• The average qualifying production costs per hour of production length aren’t less than £1 million per hour
• The slot length in relation to the programme must be greater than 30 minutes

Children’s Television Tax Relief

Introduced in 2015, this is an extension of HTR and ATR but is intended specifically for the producers of culturally British children’s television.

Your company can claim Children’s Television Tax Relief (CTR) if:

• The programme passes the cultural test or qualifies as an official co-production
• The programme is intended for broadcast
• The primary audience is expected to be under the age of 15
• At least 10% of the total core expenditure relates to activities in the UK

Video Games Tax Relief

Video Games Tax Relief (VGTR) aims to support the sustainable production of video games in the UK. Companies can potentially claim back up to 25% of the costs spend on developing the game. Last year there were 280 Video Games VGTR claims made, amounting to over £73m in tax relief.

When calculating tax deductions and payable credits, core expenditure includes things such as designing, producing and testing. However, activities such as debugging, maintenance and development of hardware are excluded. Companies qualify for VGTR if:

• The video game is British
• The video game is intended for supply, and
• At least 25% of the core expenditure is incurred on goods or services that are provided from within the European Economic Area

Theatre Tax Relief

In 2016-17, £46 million of Theatre Tax Relief (TTR) was paid out to 1,570 productions. Productions do not need to pass a Theatrical Cultural Test, and the relief has 2 rates of payable credit, 25% for touring productions, and 20% for others.

Your company can claim TTR if:

• It is a qualifying production company engaged in the making of theatrical productions
• Its primary focus is to play before a live audience of paying members of the general public or for educational purposes, and
• It has a minimum 25% European Economic Area expenditure

Orchestra Tax Relief

Launched in April 2016, Orchestra Tax Relief (OTR) applies to orchestra production companies putting on orchestral concerts.

A qualifying orchestral concert is one which:

• Is performed by instrumentalists in an orchestra, ensemble, or group
• Includes a minimum of 12 instrumentalists
• All or the majority of the instruments are not electronically amplified
• Instrumentalists are the primary focus of the concert
• The primary focus is to play before the paying public or for educational purposes
• Has a minimum 25% European Economic Area expenditure

How to claim

If your claim requires a cultural test, you must wait until your application with the BFI has been approved and you've received your interim/final certificate. Once approved you should then go about assembling a report which demonstrates the nature of the project/activity. The next step is calculating qualifying expenditure and deducting that from taxable profits. This can be a complex process, so it's worth getting specialist tax advice when putting together a claim.

When can you not claim?

There are certain circumstances that disqualify companies from claiming Creative Industry Tax Relief. You can’t claim if a programme is an advertisement/promotion, a news/current affairs programme, a game/panel show, produced for training purposes, contains elements of competition or broadcasts live events.