How to Claim Animation Tax Relief?

Animation Tax Relief (ATR) was precisely introduced for the betterment and progressive approach of animation Industry. Since UK has an extensive convention of creating successful animation programmes in series, thus its animation sector also faced an amalgamation of high costs, tough competition from strong external inducements and dwindling license fees from broadcasters. Hence, the Finance Act 2013 (now incorporated into CTA 2009 part 15A) has then introduced Animation Tax Relief, through which involved companies are liable to claim ATR on an animating programme if they have already conceded the cultural test controlled by the British Film Institute (BFI).; however animation includes various traits and techniques and hence has a wide fencings to:

  • Motionless or Computer engendered images solidified in 2D or 3D
  • Manually done graphics
  • Photographic artworks or images framed as a motionless graphics.

All such techniques may be used in combination with non-animated graphical practices. If 51% (approx.) of the total basic outlay is expended on the completed animation, then even the programmes categorized as an animation with at least 10% of the total production cost for further activities in UK. The core aim was to reinstate and bolster the traditional status of UK in animation industry with world’s leading children’s entertainment provider.

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How to Claim Animation Tax Relief?<

How to Claim Animation Tax Relief?

For any Animation Production Company (APC) to claim for Animation Tax Relief, wide ranged requirements are needed to be satisfied. Firstly the most, an animation programme needs to be qualified as British by clearing the cultural test or must be set itself as an official coproduction in UK. Further, the programme will go through the different aspects to qualify for. However this requirement parameter and qualifying process is completely pacifying, yet all the significant conditions must be satisfied to set a qualifying mode. It is to be noted here that animations specially made together are treated as single programme. For the ATR purpose, a programme or a company is entitled as a qualifying one if;

  • It is created mainly targeting the television or internet sources,
  • It is a pure animated programme, doesn’t matter whether in the bills. The relevant documents and description makes all the sense.
  • A documentary programme or a drama comprised a sectional animation and too have at least 51% of the total expenditure on the production.
  • An animated programme has 10% of the total expenses involved in the activities done within UK.
  • At least 25% of the basic expenditure in acquired on goods or services used or expended in UK for the animation production purpose. Goods or services consumption are only considered with the production venue specifically, no matter from where these have been derived.
  • It is purely a documentary or drama programme providing either information or entertainment to the viewers.
  • Precisely it passes the cultural test organized by British Film Institute and has a certification of an ethical British programme, by the Secretary of State for Culture, Media and Sport.

Furthermore, an Animation Production Company (APC) will also need to get a qualifying statement for its concerned animation programme for the smooth broadcast in UK. In spite of teaming up with many other companies, only one of the co-production companies will be entitled to qualify or claim for ATR. Company to obtain the Animation Tax Relief in theUK, if:

  • It is actively engaged in production activities and so accountable for pre-production, post production, prime filmmaking and distribution of such animated programmes.
  • It is actively tangled in commercial activities in terms of negotiations, doing contractual agreements, paying for goods, services and rights specifically in animation production.
  • The company is purely assimilated in the UK or has a permanent UK establishment falls under Corporation Tax of United Kingdom.

However, some constraints are also exists that fenced a programme or a company cannot claim for ATR if:

  • It is created for advertisement purpose or a kind of promotional show
  • It consists a quiz or gaming format or a panel show or alike formats programme
  • It is a debate, competition or discussion programme or so having a news or current affairs layout
  • It broadcast live events, including live dramatic or artistic concerts.
  • It provides a training on television or internet animatingly

The Tax Relief Process<

Moving ahead with process, being the first most step, the animation cultural test is also important to be acknowledged with. Like UK film productions tax regulation the Animation Cultural Test also set to determine the authenticity of an animation programme being culturally British. In this lieu, State Aid consent of the ATR system was approved on March25, 2013.The test is a set of different parameters with a grade point of 31 out of which getting 16 confirms an animation to be qualified for ATR.The test system is a point based arrangement segmenting with:

  • Cultural content (16 points), observes British subject matter, location, original dialogues or language, British citizenship of lead characters,
  • Cultural hubs (3 points) measures animation production services,
  • Cultural practitioners (8 points) analyze the European Economic Area (EEA) citizens involvement in the animation production, and
  • Cultural involvement (4 points) observes the animation’s contribution towards the cultural heritage and diversity of UK.

The British Film Institute receives number of applications, appearing for the cultural test to assure the grant in respect of several further animation programme productions. This formal and reputed approval is also ensuring the APC to be qualified for claiming ATR. Hence, it’s too important to have all the requirement to be fulfilled by the production house.

After being qualified, the tax Relief is then claimed by the companies. The ATR is particularly requested through the accomplishment of Corporate Tax return, mainly administered by the Creative Industry Unit at HMRC. The tax return is advised to be acquiesced within 12 months of the financial tenure of the company; however a lessening of another 12 months can also be requested on provisional basis, demanding to have the tax credits in installment and the partial tax value to be paid before the accomplishment of the production.

Benefits of the ATR<

Benefits of the ATR

Based on UK’s existing film production tax structure, ATR also allowed the APC’s to claim a development of certain succeeding outlays. Targeting the future growth and a boom in the animation world, HMRC has set up the tax relaxation in the animation production as well to promote and blossom the animation industry. Since the animation tax relief has no minimum figured expenditure requirement, hence some tallied benefits can be highlighted here:

  • A qualified APC can claim up to 25% of tax relief against qualifying expense for the eligible animation.
  • Company houses can also claim for the relief on having one registered APC with the project. The set up should be done before the shoot starts.
  • The enhanced qualifying expenditure can further be used either as a supplementary deduction fixed off against the qualified profits of APC chargeable to the corporation tax, or in return submitted for the APCs acceptance a tax credit from HMRC of up to 25% of the production spending of APC.
  • The tax relief is purely subject to a control of 80% of such expenses with an effective rebate of 20% on the same.
  • An APC also be intended for broadcast the animation creativity, including the internet broadcast; nevertheless the relieved value could be incorporated in further numbered ventures assuring more opportunistic environment.
  • The qualifying expenditure, subject to ATR, only relates to the relevant animation production programme, including the pre-production, post production and further activities. The present expenditure value does not affect the further or next claims.

However, the relief can only be operative when the animation programme is processed finally from the pre-production to its completion. For this the APC is solely responsible to get an opportunity to claim ATR.


As per available data UK spend approx. 85% of the total budget in awarding the approvals to the animation industries relieving the tax values in order to upgrade and develop the animation sector at the most. Figuring out in 2014, out of a combined budget of £67million and an anticipated UK spend of £58 million. This shows the huge trust in the bubbling future of animation industry in the UK. However, at initial the animators had a great fear regarding their survival in UK with the animation business; hence for this reason the government has introduced the Animation Tax Relief in the budget in 2012. ATR actively works for providing the opportunistic environment to the animators within the UK sustain and upgrading with new and advanced animated creativities anticipating the possibility of progressive development of animation industries supporting the socio economic stability of UK States. Hence, it’s a duty of the animation businesses as well to set the artwork on the expected parameter set by the government. The cultural heritage and creativity should be kept foremost while making animations; this will not only approve the work but would also be made eligible to get the duty relaxation.

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.


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