What do Guardians of the Galaxy, Cloverfield, Fast and Furious 6, and The Muppets Most Wanted all have in common?
They’re all British films – for the purposes of corporation tax, at least, according to the cultural test conducted by the British Film Institute (BFI).
The test certifies that a film, TV programme, animation or video game is British, and can qualify for film tax relief.
It’s wider-ranging than you might expect, as it considers not only the setting and characters of the film, but its source material, filming location, cultural contribution and key staff.
Since film tax relief was introduced in 2007, a total of £2.7 billion has been paid out to 4,495 claims.
Around £1.04bn has been given through other tax reliefs for creative industries, including TV, video games, theatre and orchestral productions.
As with many aspects of corporation tax, the complexity and detail of creative industry reliefs can seem off-putting.
But there are significant rewards if you can identify and claim the right ones for your company.
Corporation tax basics
Before you look into the reliefs your company could claim, it’s important to have a general idea of the way corporation tax works.
Corporation tax is paid by limited companies on their taxable profits from trading, investments, or disposing of assets. The main rate is set at 19% for 2019/20.
To work out how much you owe in corporation tax, you first need to know your taxable profit. This is calculated by making various additions to or deductions from your company’s profit.
Working out your profit for corporation tax can be a complicated task, and forms part of our corporate tax planning service.
Tax incentives for the creative industries
There are eight corporation tax reliefs in total that are specific to the creative industries.
These allow qualifying companies to claim a larger deduction to their profits before tax, or in some cases a tax credit.
These offer relief for:
- high-end television
- children’s television
- video games
- theatre productions
- orchestra productions
- museum or gallery exhibitions.
Your production will need to pass the BFI’s test to qualify for these reliefs if it’s a film, TV programme, animation or video game.
Theatrical productions, orchestral concerts and exhibitions don’t have to pass the same test.
Other corporation tax reliefs
Whether or not you qualify for creative industry reliefs, there are a number of other reliefs to take into account in your tax planning.
- Capital allowances can be claimed if you buy certain assets that you keep to use in your business.
- R&D tax relief is available for companies carrying out innovative projects in science and technology.
- The patent box offers relief for those making a profit from patented inventions.
- Disincorporation tax relief may be available if you close a company and become a sole trader.
You may also be able to claim relief for terminal, capital and property income losses, and trading losses.
Get in touch
Each type of corporation tax relief comes with its own intricate set of rules, which we can talk you through in more detail.
We’ve helped a number of our clients in the media and creative industries to take advantage of the opportunities available to them, and to plan effectively for corporation tax.
We can also help you choose a tax-efficient business structure, manage disposals and acquisitions, and achieve the best possible tax treatment.
Contact us to talk about how we can help your creative business.