Creative Sector Tax Relief

Creative Sector Tax Relief is a programme of tax incentives implemented in the United Kingdom in 2012 which encompass new incentives aimed at supporting the animation, high-end television and video games industries, in addition to the existing relief available for film production. The new reliefs are designed to promote culturally-relevant productions in the UK, to incentivise investment into UK productions that would otherwise take place outside the UK, and to support the necessary critical mass of infrastructure and skills in the UK for both today and in the longer term.

The government announced in the March 2012 Budget that it would introduce corporation tax reliefs from April 2013 for the video-games, animation and high-end television industries, subject to State aid approval and following consultation. These new reliefs were confirmed in Budget 2013 and the draft Finance Bill 2013. Up to this point, the creative industries had struggled to access existing technology tax relief because the qualifying definitions of schemes such as R&D Tax Relief have fallen outside the creative sectors, even though companies in these sectors are often pioneers in new and advanced technologies. The reliefs will bring the UK’s creative sector tax regime into line with other countries such as Canada and Japan which already have specific tax reliefs for the creative industries.

Production companies in all three industries are able to claim an additional deduction worth 100 per cent of UK qualifying production expenditure (where qualifying expenditure is a maximum of 80 per cent of total production expenditure) and, if they are loss-making, they will be able to surrender such losses for a payable tax credit worth 25 per cent of UK qualifying production expenditure (ie. effectively a payable credit of a maximum 20 per cent of total production expenditure). These reliefs are modelled on the existing film tax relief scheme, which has supported over £5 billion of investment into British films and seen a 70 per cent increase in the film production workforce since its introduction in 2007

The draft Finance Bill 2013 legislation allowed for qualifying expenditure incurred after 1 April 2013 to be eligible for the reliefs subject to State aid approval by the European Commission. The Commission approved the animation tax relief and high-end television production tax relief to start on 1 April 2013 once the regulations come into force with the Royal Assent of the 2013 Finance Act in August 2013. Video game tax relief was given State aid approval by the EU Commission in March 2014, meaning that it came into effect from 1 April 2014.

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