Disney made the headlines in the financial pages recently when it was reported that HMRC had paid £16.6 million over the previous year for the production of super-hero movies in the UK. This demonstrates the extent to which the government is prepared to go to stimulate investment in the UK’s creative industries with research and development (R&D) tax incentives.

Creative industries are one of the main sectors that ForrestBrown advises. It’s an interesting space in which to operate because over the last year several new tax reliefs have been introduced. These research and development tax incentives offer significant help to the producers of video games, animation and high-end television. But with these new opportunities for creative companies come pitfalls, as expert knowledge is required to maximise the reliefs available.

Tax incentives for animation, film, TV and video game producers

Rewind to 2012

Back in 2012 the Chancellor announced that he would look to extend tax relief for this sector beyond film-sets (where reliefs have been available since 2007) to encompass high-end television productions as well as video-game and animation studios.

Why? Because these are big business and make a significant contribution towards employment, tax revenue and GDP; but there was concern that production was haemorrhaging abroad. Just consider the following:

  • The UK is the second biggest exporter of television content in the world, with exports totalling more than £1.3 billion. However, producers of premium programs such as Birdsong and The Tudors had found it attractive to film overseas.

  • The UK games industry overtook its video counterpart for the first time in 2011 to become the biggest industry in the entertainment sector with sales of £1.93 billion compared to £1.80 billion for video.

  • Popular at home and abroad, classic British children’s animations such as Noddy, Thomas the Tank Engine and Bob the Builder were choosing overseas locations for production.

  • Creative Skillset identified a number of key production areas facing significant skill gaps and shortages including storyboarding, CelAction, compositing and rigging, and production management.

The Chancellor’s action is expected to encourage investment in these areas in the UK.

Avoiding the pitfalls of claiming R&D Tax Incentives

With more options now available, we find the biggest dangers in tax planning to a production company are: not being aware that tax reliefs are available at all, or that they don’t use the most appropriate tax relief, or that they don’t use the reliefs to their full potential.

An adviser should have both a depth and breadth of knowledge in this area in order to help clients avoid the pitfalls and maximise opportunity. For example ForrestBrown’s specialism is in Research and Development (R&D) tax credits which can play an important part in the creative industries. But we have a broader knowledge of the other tax reliefs available which allows us to look beyond R&D and bring in other tax reliefs if these are more appropriate.

Stacking the numbers up

The value of a good tax adviser to the creative industries comes from breaking down a spend and matching the right tax reliefs to the right parts of the budget. As the various reliefs are worth differing amounts, and two reliefs can’t be applied to the same pound it is essential this is done properly to optimise a claim.

How do you qualify for R&D Tax Relief in the Creative Industry?

The reason behind the tax credits is ultimately to boost the UK economy so of course there are a series of criteria that must be met for tax relief to be awarded. These include among others passing a British cultural test, meeting a specific definition of a film or animation etc and having a minimum proportion of the production in the UK.

It’s a great time to be producing film, games, animations and TV in the UK and you don’t have to be the size of Disney to benefit from tax incentives. For more information on maximising your tax relief call ForrestBrown on 0117 926 9022 or contact us via the website.

 

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