Creative Industry Tax Reliefs – what are they and how can your company benefit?
The government have recently announced that £879m in tax relief was provided to firms in the creative industries sector for the year to 30 June 2018. But what exactly is meant by ‘creative industries’, and how can SME’s within this sector benefit from the tax relief available?
What is it?
Creative Industry Tax Relief is providing additional Corporation Tax Relief to companies that undertake certain activities. This includes the production of films, video games, high-end television, animation, children’s television, theatre shows, orchestra shows and the running of museums.
Who can benefit?
The relief is not restricted to companies whose sole activities are those listed above. For example, it could be that you have produced an animated short film surrounding your business activities. If this activity was to meet the qualifying criteria, then animation tax relief would be available.
Examples of qualifying activities
Examples of activities that could qualify for the above tax reliefs include the production of a pantomime, the running of museum or art gallery for the public, the production of an orchestra performance, the production of an animated television programme, the production of a video game or the production of a film.
How does it work?
The tax relief acts initially as an additional deduction of 80p for every £1 spent on qualifying activities. The additional deduction will then either reduce the profits chargeable to Corporation Tax, resulting in an additional 15.2p tax relief per £1 spent or, if the additional deduction takes the company into a loss position, a cash credit of a maximum 25% of the loss will be payable to the company. For example, £10,000 of qualifying costs would result in a cash payment from HMRC of £2,000.
The costs that can be claimed relate to the production of the activity or the running of the museum, as opposed to the design of the activity or the performance itself. These costs could include staff/performers time, stage costs or software for animation costs.
How can we help you?
We can look retrospectively review a company’s position to ensure that a claim for the tax relief is maximised. This could result in a repayment of Corporation Tax from an earlier year.
For advice and guidance on R&D Tax Credits and if it is applicable to your business please contact Phil Hartley for a no obligation conversation.
Director of Tax0161 817 6100Manchester