25th October 2013

New film tax and animation tax relief

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25th October 2013

New film tax and animation tax relief


We are not accountants and our IP team in particular goes slightly pale as soon as the word ‘tax’ crops up.  However, when it concerns IP, we are willing to listen and read up in order to alert our IP readers to new tax initiatives!

The Finance Act 2013 recently received Royal Assent and implements the new animation tax relief with retrospective effect to expenditure incurred by film makers and animators after April 1 2013.  It is hoped that the tax relief will promote the production of significant film and animation in the UK.

Limited-budget films are entitled to either:

  • a tax deduction of 100{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of enhanceable expenditure. Enhanceable expenditure is the lesser of UK expenditure or 80{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of qualifying expenditure 
  • if a loss is surrendered – 25{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48}  of the loss up to the amount of enhanceable expenditure

Other films are entitled to either:

  • a tax deduction of 80{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of enhanceable expenditure as defined above in limited budget films   
  • if a loss is surrendered – 20{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48}  of the loss up to the amount of the enhanceable expenditure

For all films, the maximum amount that can be claimed is the lower of the enhanceable expenditure for that accounting period or the amount of the loss.

Animation Tax Relief

Qualifying companies can claim either:

  • an additional tax deduction (the enhancement) of 100{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of enhanceable expenditure (the lesser of UK qualifying expenditure or 80{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of total qualifying expenditure) 
  • if a loss is surrendered – 25{ba3215b0bf35eaeb06be458b3396ffbfc50bb9db10c9ff1594dfc3875e90ea48} of the loss up to the amount of enhanceable expenditure
    Detailed guidance on the taxation of film and television production companies, including examples of how the relief is calculated, is available from  http://www.hmrc.gov.uk/ct/forms-rates/claims/creative-industries.htm  

A further tax relief aimed at video games development (and therefore relevant for MANY of our IT clients) is currently under review.

Watch this space….