Life can be tough in the creative industries, but tax relief could come to the rescue

Are you missing out on valuable tax relief? If you’re in the creative industry, there’s a good chance you could be owed a rebate without knowing it, thanks to rules surrounding research and development tax relief. But what is it and how can you find out if you’re eligible?

R&D Tax Relief

Businesses in the creative sectors are some of the most exciting and imaginative around, but competition is intense and many find themselves operating on thin margins. So, every little advantage helps.

The idea behind R&D tax relief is to encourage innovation. If you’re a company in the creative industry and you invest money in developing new products and services, or enhancing existing ones, you may be entitled to a cash pay-out, or a reduction on your corporation tax obligations.

Many people instinctively think of research and development as being complicated processes with men in white coats, but it can be much wider than that. It could be something as developing a short film, or producing a new piece of content. Either way the amount you could receive might be sizeable. Small to medium sized businesses could get 33p in every £1 back of qualifying expenditure.

To qualify, a business must be liable to corporation tax and directly involved in the production of certain films, animations, video games, theatrical productions and high-end children’s television programmes.

Each project will have to pass a cultural test or qualify through an internationally agreed co-production or treaty certifying that the project is a British film, video game or programme, although there are specific rules for certain sectors.

Theatre Tax Relief

One of these is theatre tax relief. In 2014, the Government introduced the Theatre Tax relief Act which extended many of these reliefs to the performing arts. To qualify, an organisation must be involved in the production, running and closing of a theatrical production.

It must also be:

• A theatrical production company
• The primary focus must be to play before an audience of paying members or for education purposes
• At least 25% of expenditure is incurred through the European Economic Area (EEA)
• Unlike some other forms of creative industries tax relief there is no need for a cultural test and it is payable at two rates: 25% for a touring production and 20% for others.

Video Games Tax Relief

Video games companies often overlook R&D Tax credits, but these could be extremely valuable. To qualify, the game must be British, intended for supply and at least 25% of expenditure must be incurred by goods or services which are provided within the EEA.

If you do qualify for this you might also be able to add an additional deduction when computing your taxable profits and surrender losses for a payable tax credit when that deduction results in a loss. In total, you could be able to claim 20% of your production costs.

Find out if you qualify for R&D tax relief

Apart from Theatre Tax Relief and Video Games Tax Relief mentioned above, there are other tax reliefs including: Film Tax Relief, Animation Tax Relief, High-end Television Tax Relief, Children’s Television Tax Relief and Orchestra Tax Relief.

There are also two other forms of tax reliefs:

• The Enterprise Investment Scheme (EIS) which gives investors generous tax benefits.
• The Seed Enterprise Investment Scheme (SEIS) which is designed to help start-ups raise equity finance by offering a range of tax reliefs to individual investors.

Tax relief is often an area of support which many businesses don’t think about. The scope of research and development, as laid down by these rules, is actually much wider than most people imagine, so you could be missing out on an incredibly important source of cash for your business.

At Berley, we can help creative industries to succeed by working with you to manage your accounts, deal with your cashflow, and provide advice on potential tax breaks. Through assessing your business, we can determine whether or not you qualify for R&D tax relief, or any other tax relief that could be applicable to your business, to ensure that you are getting all the benefits that you are entitled to.

To find out more about how Berley can support you with receiving tax relief, call us today on 020 7636 9094.