The creative industry is arguably one of the most valuable sectors for the enrichment of UK culture. In fact, before the COVID-19 pandemic it was one of the fastest-growing sectors in the UK economy. While the nation attempts to recover economically, we’re beginning to see the impacts that the several lockdown periods had on creative industries, as many creative projects had to be postponed or even cancelled.
There are, however, several creative industry corporation tax reliefs available, which are in place so that qualified companies can increase their amount of allowable expenditure. In this week’s Tax Tuesday, we shed light on the eight creative industry tax reliefs that are available for corporation tax in the UK.
What are the creative industry tax reliefs?
There are eight creative industry Corporation Tax reliefs available, which are in place so that companies who qualify can increase their amount of allowable expenditure. This is done by reducing how much Corporation Tax a company will be required to pay.
To claim one of the creative industry tax reliefs, your company must be:
- liable to Corporation Tax
- involved with decision-making
- directly negotiating, contracting and paying for rights, goods and services
- directly involved in the production and development of one of the following:
○ high-end television
○ children’s television
○ animation television
○ video games
○ theatrical productions
○ orchestral concerts
○ museums or gallery exhibitions
When a company applies for a creative industry tax relief, the project (films, animations, television programmes, or video games) must be certified as British. To do this, they must pass a cultural test or qualify through an internationally agreed co-production treaty. This certification and qualification is done by the British Film Institute (BFI), who issue an interim certificate for uncompleted work, and a final certificate when production has finished.
The film, high-end television, animation, children’s television and video game tax reliefs are available on qualifying UK core production expenditures on the lower of either 80% of the total core expenditure or the actual UK core expenditure incurred, with no cap. As well as this, the production company must be within the UK Corporation Tax net, and the programmes (for high-end television, animation and children’s television) must not be one of the excluded programmes. For each tax relief, there is a more complex criteria, which we’ll delve into…
1. Film tax relief
On top of passing the cultural test or qualifying as an official co-production, films must be intended for theatrical release and have a minimum UK core spend requirement of 10%, including those made under official co-production treaties.
Each of the following television tax reliefs have fulfil the same basic criteria as film tax relief, but to qualify, television productions must be intended for broadcast, rather than theatrical release. This can includes being broadcast on the internet.
2. High-end television tax relief
Along with passing the high-end television cultural test, or qualifying as an official co-production, high-end television programmes must:
- be a drama, comedy or documentary
- ensure at least 10% of the core expenditure takes place in the UK
- ensure the average core expenditure per hour of slot length is at least £1 million per hour (pro rata)
- ensure the slot length for the programme is greater than 30 minutes
3. Animation tax relief
Similarly to high-end television tax relief, animation tax relief has definitive criteria for programmes to qualify. The programme must:
- spend at least 52% of the total core expenditure on animation
- spend at least 10% of the core expenditure in the UK
4. Children’s television tax relief
Again, whilst the programme must fulfil the same basic criteria as film, high-end television and animation, it must also:
- ensure at least 10% of the core expenditure is spent in the UK
- have a primary target audience below the age of 15
5. Video games tax relief
Companies that produce video games may qualify for video games tax relief for their UK or Eurpoean Economic Area (EEA) production expenditures on the lower of either 80% of the total core expenditure or the actual UK/EEA core expenditure incurred. This is uncapped.
On top of this, in order to qualify for the video games tax relief, the video game must:
- qualify as British under the video games cultural test
- be intended for release
- have used at least 25% of core expenditure in the UK or EEA
6. Theatrical tax relief
The theatrical tax relief applies to companies that put on ballets, plays, operas, musicals or other dramatic pieces that tell a story through live performance. To qualify for the relief:
- All or most of the performances must be for paying members of the general public or be provided for educational purposes
- At least 25% of the ‘core costs’ must be used on goods or services provided from within the UK or EEA.
7. Orchestra tax relief
Companies who put on a qualifying orchestral concert can claim this tax relief. These include concerts which:
- are performed wholly or mainly by instrumentalists who are the primary focus of the concert, such as:
- consist of a minimum of 12 instrumentalists
- all or the majority of the instruments are not electronically amplified
- are intended to be performed live for the paying public or for educational purposes
- spend at least 25% of core costs on goods or services provided from within the UK or EEA.
8. Museums and galleries exhibition tax relief
The museums and galleries exhibition tax relief is made available to qualifying primary and secondary production companies that put on a qualifying exhibition. Qualifying companies must maintain a museum or gallery and be either a charitable company or a company wholly owned by a charity or local authority.
For an exhibition, there can only be one primary production company. These are companies that:
- make an effective creative, technical or artistic contribution
- are actively engaged in planning and decision-making
- directly negotiate, contract and pay for rights, goods and services
- are responsible for producing and running the exhibition at a venue
There can be more than one secondary production company in relation to an exhibition for those held at two or more venues. These are companies that are:
- responsible for producing and running the exhibition at a venue
- actively engaged in decision-making in relation to that venue
Qualifying exhibitions are a curated public display of an organised collection of objects or works (this can include a single object) considered to be of interest in one of the following ways:
Like the rest of the creative industry tax reliefs, a qualifying exhibition must have at least 25% of core costs spent on goods or services that are provided from within the UK or EEA.
How can we help?
If you think that your company may qualify for a creative industry tax relief, contact our team for further advice at firstname.lastname@example.org or call 0161 905 1616