Business tax – guidance

Corporation Tax: creative industry tax reliefs

How to qualify, calculate and claim Film Tax Relief, Animation Tax Relief, High-end Television Tax Relief, Video Games Development Relief and Theatre Tax Relief.

Overview

Creative industry tax reliefs are a group of 5 Corporation Tax reliefs that allow qualifying companies to claim a larger deduction, or in some circumstances claim a payable tax credit when calculating their taxable profits.

These reliefs work by increasing the amount of allowable expenditure. Where your company makes a loss, you may be able to ‘surrender’ the loss and convert some or all of it into a payable tax credit.

Qualifying rules

Your company qualifies for and can claim creative industry tax reliefs if it’s:

  • liable to Corporation Tax
  • directly involved in the production and development of certain films, ‘high-end’ television programmes, animation programmes or video games

Companies that produce films and television production companies producing relevant animation and high-end television programmes are subject to special tax rules.

These rules apply to all:

  • film production companies producing films (whether or not the films are intended for cinema release)
  • television production companies producing relevant animation or high-end television programmes

Companies can choose to opt out of these rules. However, they won’t then be eligible for creative industry tax reliefs .

The ‘cultural test’

To qualify for the creative industry tax reliefs all films, television programmes, animations or video games must pass a ‘cultural test’ or qualify through an internationally agreed co-production treaty - certifying that the production is a ‘British film’, ‘British programme’ or ‘British video game’. In all cases, formal certification is required to qualify.

Certification and qualification is administered by the British Film Institute (BFI) on behalf of the Department for Culture Media and Sport. The BFI will issue an interim certificate for uncompleted work or a final certificate where production has finished.

If you have any queries concerning certification, write to:

Anna Mansi
Head of Certification BFI
21 Stephen Street
London
W1T 1LN

Alternatively you can email anna.mansi@bfi.org.uk.

Film Tax Relief (FTR)

Your company will be entitled to claim FTR on a film if:

  • the film passes the culture test - it’s considered a ‘British film’
  • the film is intended for theatrical release
  • at least 10% of the total production costs relate to activities in the UK
  • the first day of principal photography took place on or after 1 January 2007

Find detailed guidance on the taxation of film in the Film Production Company Manual.

Animation Tax Relief (ATR)

Your company will be entitled to claim ATR on an animation programme if:

  • the programme passes the cultural test - a similar test to that for FTR but within the European Economic Area
  • the programme is intended for broadcast
  • at least 51% of the total core expenditure is on animation
  • at least 25% of the total production costs relate to activities in the UK

Animations commissioned together are treated as one programme.

However, your company can’t claim ATR if the programme:

  • is an advertisement or promotional programme
  • is a news, current affairs or discussion programme
  • is a quiz or game show, panel show, variety show, or similar programme
  • consists of or includes an element of competition or contest
  • broadcasts live events, including theatrical and artistic performance
  • is produced for training purposes

Find detailed guidance on the taxation of animation in the Animation Production Company Manual.

High-end Television Tax Relief (HTR)

Your company will be entitled to claim HTR on a programme if:

  • the programme passes the cultural test - a similar test to that for FTR but within the European Economic Area
  • the programme is intended for broadcast
  • the programme is a drama, comedy or documentary
  • at least 25% of the total production costs relate to activities in the UK
  • the average qualifying production costs per hour of production length is not less than £1 million per hour
  • the slot length in relation to the programme must be greater than 30 minutes

Programmes commissioned together are treated as one programme.

However, your company can’t claim HTR if the programme:

  • is an advertisement or promotional programme
  • is a news, current affairs or discussion programme
  • is a quiz or game show, panel show, variety show, or similar programme
  • consists of or includes an element of competition or contest
  • broadcasts live events, including theatrical and artistic performance
  • is produced for training purposes

Find detailed guidance on the taxation of high-end television in the Television Production Company manual.

Flowchart to help you decide whether your company is a television production company

This file may not be suitable for users of assistive technology. Request a different format.

If you use assistive technology and need a version of this document in a more accessible format, please email different.format@hmrc.gsi.gov.uk. Please tell us what format you need. It will help us if you say what assistive technology you use.

Video Games Tax Relief (VGTR)

VGTR is available from 1 April 2014. Your company will be entitled to claim VGTR if:

  • the video game is British
  • the video game is intended for supply
  • at least 25% of core expenditure is incurred on goods or services that are provided from within the European Economic Area (EEA)

If your company qualifies to claim to VGTR your company is also entitled to:

  • an additional deduction in computing their taxable profits
  • where that additional deduction results in a loss, to surrender losses for a payable tax credit

Both the additional deduction and the payable credit are calculated on the basis of EEA core expenditure up to a maximum of 80% of the total core expenditure by the video games company. Core expenditure is expenditure on pre-development, principal photography and post-development.

Further guidance is available in the taxation of Video Games Development Company manual.

Interaction of VGTR and Research and Development Relief

Some video games development companies may be carrying on research and development and or may have claimed Research and Development (R&D) Relief in the past.

It’s important to note that where small or medium-sized enterprise (SME) R&D Relief is claimed on a project, that project can’t claim for any other state aid reliefs (including video games tax relief and grants). This means that if a video games development company chooses to claim VGTR any R&D ‘bubble’ within a project wouldn’t qualify for R&D Relief under the SME scheme.

For large companies who carry out R&D and claim under the large scheme, the rules are different. This is because R&D claimed under the large scheme is not state aid, and therefore the ‘bubbles’ of R&D within a project may be eligible for R&D Relief.

However, the Research and Development Expenditure Credit scheme for large companies is different to the large scheme. Under this scheme the VGDC doesn’t have a choice.

Find more detailed guidance in Corporate Intangibles Research & Development Manual.

Theatre Tax Relief (TTR)

TTR is available from 1 September 2014.

Your company will be entitled to claim TTR if:

  • it is a Theatrical Production Company
  • it is a Qualifying theatrical production
  • it has a minimum 25% EEA expenditure
  • there is no need for a Cultural Test
  • it has 2 rates of payable credit, 25% for touring productions, and 20% for others

Detailed guidance will be available in Spring 2015.

Calculate the relief

When calculating the enhanced deduction or payable tax credit:

  • core expenditure is the total expenditure on pre-production, principal photography and post production
  • qualifying expenditure is the expenditure on goods and services which are used or consumed in the UK for FTR, HTR and ATR or the expenditure on goods and services provided from within the EEA for VGTR

The rates of both enhancement and any payable tax credit are determined by the level of total core expenditure incurred.

FTR

How much relief or credit you can claim depends on whether the film is considered a limited-budget film. Limited-budget films are those with a total core expenditure of £20 million or less.

Limited-budget films are entitled to either:

  • a tax deduction of 100% of enhanceable expenditure - enhanceable expenditure is the lesser of UK expenditure or 80% of qualifying expenditure
  • if a loss is surrendered - 25% of the loss up to the amount of enhanceable expenditure

Other films are entitled to either:

  • a tax deduction of 80% of enhanceable expenditure as defined above in limited budget films
  • if a loss is surrendered - 20% of the loss up to the amount of the enhanceable expenditure

For all films, the maximum amount that can be claimed is the lower of the enhanceable expenditure for that accounting period or the amount of the loss.

ATR and HTR

Qualifying companies can claim either:

  • an additional tax deduction (the enhancement) of 100% of enhanceable expenditure (the lesser of UK qualifying expenditure or 80% of total qualifying expenditure)
  • if a loss is surrendered - 25% of the loss up to the amount of enhanceable expenditure

VGTR

After 1 April 2014 qualifying companies can claim an additional deduction in respect of qualifying expenditure on the game:

  • the additional deduction is calculated on so much of the expenditure is EEA expenditure (subject to the subcontracting cap) or 80% of the total expenditure, if less
  • enhancing the expenditure by 100%

Or if the company makes a loss in any accounting period, it may surrender this for a payable video games tax credit:

  • the surrenderable loss is the loss in the period or if less the available qualifying expenditure effectively incurred in the same period
  • this is paid at a rate of 25% for a game

Detailed guidance on television and animation production companies, including examples of how the relief is calculated, is available in the Television and Animation Production Company Manual.

TTR

Relief is given by way of an additional deduction when calculating the taxable profits or losses of the separate theatrical trade. This will either reduce the taxable profits or create or augment a loss, a proportion of which can be surrendered for a tax credit.

The additional deduction is the lower of:

  • 80% of the total expenditure on producing the game or the theatre production
  • the EEA expenditure

How and when to claim

You can claim for relief in your Company Tax Return once your company has received its certificate from the BFI. If you have received an interim certificate you must apply for a final certificate after the film, television programme or video game has been completed. If you don’t, you will have to repay any interim relief already paid. Certificates should be sent with the return.

You may make, amend or withdraw a claim to creative industry tax reliefs up to one year after the company’s filing date.

HMRC may agree to accept late claims in some circumstances.

Other reliefs available

The Enterprise Investment Scheme (EIS) provides investors who subscribe for equity in a company conducting qualifying trade generous tax benefits.

The Seed Enterprise Investment Scheme (SEIS) is designed to help small, early-stage companies to raise equity finance by offering a range of tax reliefs to individual investors who subscribe for new shares in those companies.

Further information

A specialist unit within HMRC deals with most claims for creative industry tax reliefs . You can send your questions about claiming the reliefs to the Creative Industry Unit.

If your cases are dealt with by Large Business, contact your HMRC Customer Relationship Manager.

If you’ve any general or policy queries about the current rules or earlier reliefs for film production, contact Nalini Arora.

The Foreign Entertainers Unit (FEU) is a specialist unit within the HMRC who agree the UK tax liabilities of individual non UK resident entertainers and sports persons who perform in the UK. The FEU also manages the UK withholding tax system.

The Film, Television and Production Industry guidance notes provide advice with regard to the application of PAYE and National Insurance contributions to non-permanent, casual and freelance workers in the film, television and production industries.