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Curtain up on creative tax relief

The tax reliefs available to the creative sector have burgeoned in recent years. Dave Mouncey and Mark Wingate of Smith & Wlliamson explain the rules.

Recent figures published by the Department for Culture, Media and Sport show that the creative sector is now worth more than £8.8m an hour to the UK economy (£76.9bn a year) and that 2015 is set to be another bumper year for the UK’s creative output.

Given that the industry plays such a key role in the government’s long-term economic plan, it is no surprise that specific tax measures have been introduced to both secure the industry’s future in the UK and encourage further investment.

Overview of reliefs

The legislation for the existing creative sector reliefs was introduced by the Finance Acts 2006, 2013 and 2014 and is in parts 15T15C, Corporation Tax Act 2009.

Creative sector reliefs enable a qualifying company to obtain an enhanced deduction in computing its taxable profits. Where that additional deduction results in a loss, the company can surrender that loss for a repayable tax credit.

There are six categories of relief, which are summarised in Table 1 opposite. Only companies liable to UK corporation tax are eligible for relief and these must meet certain conditions.

Individual film, TV and theatre productions and video games must be accounted for as separate trades and it may be appropriate to consider separate entities for each production/game.

A common feature applicable to all the reliefs apart from theatre relief and orchestra relief is that the production is certified as meeting a British cultural test.

The main criteria applicable to each relief are as follows.

Film

A film must pass the cultural test to be regarded as a 'British Film', it must be intended for theatrical release and at least 10% of core expenditure must be incurred on goods or services used or consumed in the UK.

This is an extract from an article in the September 2015 edition of TAXline, the magazine of the Tax Faculty.

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