What are the Creative Sector Reliefs
The creative industry tax reliefs were introduced to support the UK’s exceptional output and skill base across a range of creative industries. The aim is to maintain and increase the UK’s competitive advantage in these sectors, and to ensure that vital business is not lost to other countries that already offer such incentives.
WHAT CREATIVE INDUSTRIES ARE INCLUDED?
There are six creative sector reliefs:
- Film Tax Relief
- Television Tax Relief – with specific reliefs existing for high end TV, animation and children’s TV
- Video Games Tax Relief
- Theatre Tax Relief
- Orchestra Tax Relief
- Museums and Gallery Exhibitions Tax Relief
The first two are collectively referred to as the audiovisual reliefs, whereas the latter three are grouped together as the cultural reliefs.
How can I tell if I qualify?
The reliefs are generally given to the relevant production company in relation to qualifying expenditure as long as a number of conditions are met.
The production company is the company most responsible for producing, running and closing the production. They would make an effective creative contribution to the production as well as being actively engaged in decision making and negotiating and paying for relevant goods and services.
For film, television and video games, there are points-based tests to assess the level of British cultural content. If you can show a sufficient level of UK (or EEA) connections, the BFI will certify your production as a British film, programme or game.
To qualify for theatre, orchestra or museum and gallery exhibition production tax relief, a company must satisfy certain conditions relevant to each individual tax relief.
What Relief is available?
Until recently all creative sector reliefs allow the companies responsible for a qualifying production to:
- claim an enhanced tax deduction to reduce the taxable profits, or, if this results in a loss
- surrender the losses of the creative trade in exchange for a payable tax credit
However, from 1 January 2024, the audiovisual and video game tax reliefs transition to a new taxable credit scheme. The new regimes are available to claim from 1 January 2024, with new productions having to claim them from 1 April 2025 and all productions moving to the new regimes from 1 April 2027.
To help clarify this point, the following table provides details of the tax saving or repayment credit resulting from £100,000 of qualifying expenditure.
| Creative Sector Reliefs (based on tax rates from 1 April 2023) | Based on new AVEC/VGEC (available from 1 January 2024) | |||
| Profit-making % | Loss-making % | Profit-making % | Loss-making % | |
| Film, High-end TV, Video Games | £15,200-£21,200 | £16,000-£20,000 | £25,500 | £25,500 |
| Animations, Children’s TV | £15,200-£21,200 | £16,000-£20,000 | £29,250 | £29,250 |
| Cultural Reliefs | £15,200-£21,200 | £36,000-£40,000* | £15,200-£21,200 | £36,000-£40,000* |
*Cultural relief tax credit rates are temporarily increased to higher rates following the Covid Pandemic.
WHAT EXPENDITURE QUALIFIES FOR CREATIVE SECTOR RELIEF?
Unlike the R&D relief rule, there are no specific categories of qualifying expenditure for the Creative Sector Reliefs. Instead, activities carried out by the company on the creative tasks are treated as a separate trade for each production, meaning that any income and costs must be separated out.
The activity required to develop or produce the final product is then divided into specific phases. Those corresponding to production or development activity with any expenditure required to successfully deliver these phases are regarded as core (qualifying) expenditure.
Thus for Video Game Tax Relief, any expenditure on designing, producing and testing the Video Game is eligible for relief. Costs on the initial concept, on debugging or on any non-production activities (eg distribution, legal or commercial costs) are excluded.
DO I HAVE TO MAKE A PROFIT AND PAY TAX TO MAKE A CLAIM?
No – even if your company is loss making or exempt from corporation tax in the case of a charity, it can still make a claim and receive a tax credit repayment, even if you have never paid corporation tax.
DOES THE PRODUCTION HAVE TO BE COMPLETED BEFORE I CAN MAKE A CLAIM?
In a word, no! Where production spans multiple accounting periods, the rules allow for relief to be claimed for interim periods. For film, television and video games, you will need to obtain an interim BFI certificate approving the production as British.
In all cases, claims will require you to make an estimate of the final income and costs, such that relief can be claimed in relation to stage of completion of the project, based on the level of costs incurred to date.
IF I HAVE RECEIVED OTHER GRANTS WILL THIS IMPACT THE CREATIVE SECTOR CLAIM?
The rules in relation to creative sector reliefs are not as restrictive as the R&D rules, however they are state aids. Support from all state aids (eg grants, direct payments, interest rate subsidies, tax reliefs, guarantees, finance or any other aid by a state) to the same project must be aggregated or ‘cumulated’ to arrive at an intensity figure.
The state aid approval awarded to each relief will specify the acceptable intensity level. For example, video game productions cannot receive aid from all state aids of more than 50% of the total budget for the game.
For completeness, it is not possible to make a claim for a Creative Sector relief on expenditure on which R&D relief has been claimed under the SME scheme, or would be entitled to claim under the RDEC scheme.
WHAT ARE YOUR FEES FOR PREPARING CREATIVE SECTOR TAX RELIEF CLAIMS?
This will vary depending on the scope and complexity of your claim; however, our expert team would be happy to have a call with you to discuss your work in more detail and provide you with an indicative quote.
If you are comfortable preparing your own claims but are concerned at the level of change in the rules and the increasing level of compliance activity from HMRC, or simply wish to ensure that you are claiming the full amount you are entitled to, we are happy to discuss undertaking detailed reviews of your claims.
CAN SOLE TRADERS AND PARTNERSHIPS CLAIM CREATIVE SECTOR TAX RELIEFS?
No – only ‘incorporated bodies’, such as companies, clubs or societies that are liable to corporation tax can make a Creative Sector claim.
Unincorporated charitable associations or trusts are also restricted from making claims.
Museums and Gallery Exhibitions Relief (MGETR) is further limited to (incorporated) charities or their trading subsidiaries.
HOW LONG DO I HAVE TO MAKE A CLAIM?
You have 2 years after the accounting period end to make a Creative Sector claim after which time the period is closed for making claims.
HOW ARE CREATIVE INDUSTRY CLAIMS MADE?
A claim for the relevant creative sector tax relief must be made in the company tax return. Supporting evidence must also be provided to HMRC, as detailed in their guidance, either with the return or by completing an online form.
For claims made on or after 1 April 2024, the information to support the claim must be provided via the online form. This includes additional information that is required to accompany the claim, including the disclosure of connected-party transactions.
HOW LONG DO HMRC TAKE TO PROCESS CREATIVE SECTOR CLAIMS AND ISSUE ANY REPAYMENTS DUE?
HMRC normally look to process claims within 28 workings days of receipt.