Creative Industry Tax Relief (CITR) is a scheme to provide tax incentives implemented in the United Kingdom in 2012. This comprehends new tax encouragements particularly supporting the high-end television, animation and video game industries, along with the current tax reliefs available for a sustainable development of the film industry within the UK. The new conceptual reliefs are so introduced to support and promote the cultural pertinent creative programs and productions in the UK so as to create the interest and trust of the production houses in the markets within the UK, assuring the bright possibilities of immense development of the creative and film industry there. The further tax relaxations hence confirmed the government’s trust in the future prospects of creative industry in UK. To maintain such industries within, it was necessary to support the essential huge quantity of structure and skills in the UK forever to lead the world in terms of creative works and animations.
CITR allows qualifying companies to claim a big amount of tax exemption or even request the HM Revenue and Customs to allow a payable tax credit in certain conditions, while calculating the tax value. More significantly, these assistances work by accumulating the permissibleoutlaysum, providing a huge profitable relief to the production companies so as to promote the cultural heritage and diversity of the UK. Supporting the entire dimensions of creative industry, in 2014 the Theatre Relief was also announced, targeting to have more cultural based productions in UK. Further, to obtain the relief, all the production houses must be certified by the Department for Culture, Media and Sport (DCMS) as culturally British. The core objective to offer such immiscible assistances isto make UK the technology hub of the entire Europe, also to support the productions to achieve technological innovations and digital growth.
The Categorized Reliefs – Requirements and Benefits
Precisely group of eight corporation tax reliefs summarizes the Creative Industry Tax Relief. This allows them to claim a larger exemption in payable tax or may request to claim a payable tax credit as well. These reliefs are categorized as; Film Tax Relief (FTR), Animation Tax Relief (ATR), High-end Television Tax Relief (HTR), Children’s Television Tax Relief (CTR), Video Game Tax Relief (VGTR), Theatre Tax Relief (TTR), Orchestra Tax Relief (OTR), Museum and Galleries Exhibition Tax Relief (MGETR). These reliefs usually work on increase of allowable expenditure on the creative production.
a. High – end Television Tax Relief and Children’s Television Tax Relief
- Companies mainly deal in the production of high-end television and children’s television programmes can claim for HTR and CTR.
- The relief applies to the qualifying expenditure sustained on or after April 1, 2013 for high-end TV shows.
- Qualifying outlays incurred o or after April 1, 2015 for children’s TV programmes within the UK.
b. Video Games and Animation Tax Reliefs
Likely to television relief Video Games Tax Relief and Animation Tax Relief are structured only for those, which are actively involved in the production of specific programmes only. However, to regulate the qualifying eligibility, one could face some challenges to process these reliefs:
- Income, production cost, tax adjustment and all other monetary issues must be mentioned separately for every produced animation or video subject to the distinct trade in corporation tax computation of the concerned company.
- R & D tax relief cannot be claimed further after applying for such reliefs concerning to the same expenditure aspiring the additional benefit.
- To calculate the attributed income of the concerned television programme if is being sold as a package section compiled with other programmes too or so with other commercial rights and regulations.
- It also being challenging to judge whether the cultural test will be occurred, when a desired figure is assumed to appeal for the relief before the programme or video game is completed.
c. Film Tax Relief
Film Tax Relief has been revised many times over recent years, aiming to the vigorous growth of the film industry in the UK. These further amendments are purposely introduced to promote the sector and also to encourage the investors to strengthen their trust in the blossoming UK film industry.
Also, the cultural test enlargement including European and British culture both makes large number of films attracted towards the tax relief and tend them to process the same. These further changes benefited both small and large budget films and encourage investing in the UK film industry promising an assured profit.
d. Theatre Tax Relief
- Companies who are flagrantly involved in the theatre artwork are eligible to claim for the theatre tax relief.
- The relief applies to the qualifying expenditure incurred on or after September 1, 2014, on the theatrical productions specifically.
- The relief supports chiefly to plays, opera, musicals and ballet and dance format shows.
- If a programme qualifies to being core European Economic Area (EEA) expenditure, then a remarkable exemption can be offered up to 100% of the whole spending.
- Additionally, for being EEA specific, a payable tax credit may also be facilitated up to 25% on the summed losses. TTR has the assessment grounds similar with the Film Tax Credit.
- The company must be directly involved in the theatre work production. This indicates that the prime responbilities must be carried out referencing the core production by the applicant company. If the company is participating as a co-producer for a single production, teaming up with others then only one authorized and qualified company will be eligible to claim the relief.
- Each performance must be performed live to qualify for the TTR. Company must be either primarily responsible for the production process or have an authority for decision making. Companies involved in producing live events are only liable for the assistance.
- Most of the live performances must be either envisioned for educational purposes or done for commercial aspects. Programmes other than the mentioned area will not be included in the qualifying programmes.
e. Orchestra Tax Relief and Museum Tax Relief
- Orchestra Tax Relief is available against the corporation tax only for the companies involved in the orchestral concert qualifying for the orchestra production.
- As on April 1, 2016 or afterward, the authorized company may claim for the relief against the qualifying expenditure sustained.
- The Orchestral Relief alike to Theatre Tax Relief also offers an additional notable deduction up to 100% of qualifying European Economic Area (EEA) expenses.
- Moreover, a payable tax credit up to 25% on submitted losses also,is granted under the scheme.
f. Museum and Galleries Tax Relief
- The Museum and Galleries Tax relief is the eighth in the series, designed to support the organizations to create and tour public facing exhibitions.
- The relief is effective form April 1, 2017, i.e., the qualifying companies on or after the mentioned date, involved in the concerned field may claim for the relief.
- Companies must note that such events referencing marketing, financing, legal, storage, purchase of exhibits are not entitled to appeal for the relief.
- Additionally, if an exhibition runs for or more than 12 months are also excluded. Speculative expenses in such events may too disqualify a company to claim for the relief.
- Similar qualifying condition exists for this section as well, i.e., qualifying expenditure made within the European Economic Area and 25% of the whole expense too must be within EEA.
- Only expenditure on producing and placing / closing the exhibition at each assigned venues is eligible to claim the relief.
- The film and related tax credits have always been anticipated as a means of leveraging additional commercial investment, promoting film production activities in the UK.
- The tax reliefs are structured as tax credits, enabling additional deductions for qualifying films.
- Theatre, Orchestra and the Museum Tax relief are also enlisted in the tax exemption process to provide a wide extent to the production houses dealing in different aspects of the creative work.
- Commercial investment has also been encouraged with this tax credit in theatres by making commercial productions proving more financially stable.
- HM treasury fully supports the theatre companies by backing them in tax credit and huge exemption in being EEA, promoting the cultural heritage and diversity in the UK.
- A significant relief is also provided to the museum companies. By setting such parameters many non- profit organization are now coming to claim the relief rather than the commercial one. This aids the cultural heritage, sustained by such companies ensuring the significant growth in the UK.
Though a wide ranging tax relief is being introduced by HMRC facilitating the production houses dealing in various aspects of the entertainment industry, yet there is a great need to revise and extend these credit systems periodically. Such revision will promote the batter creative and also will secure any offence of state aid rule alongside. Furthermore, to grab all the benefits of these tax credits all production houses must ensure to submit the income and expenditure details for each performance with all accuracy to the panel, claiming for the relief.