Today we are going to break down what you should and need to know about animation tax relief. As an accountant to professionals in the creative industry we regularly get asked questions about animation tax relief.
Animation Tax Relief was introduced in 2013 and is a form of Television tax relief. The legislation recognises that the production of each animation is a separate trade with a start and end date separate to that of the company. Therefore the relief is given per animation.
Television tax relief applies to Television Production Companies engaged in the making of:
· A British Programme
· A programme that is intended for broadcast
· A television programme where at least 25% of the core expenditure incurred on goods or services are used or/and consumed in the UK. This percentage was reduced on 1st April 2015 to 10% for programmes that had not complete the principle photography by that date.
The eligible television production companies are entitled to claim:
· An additional deduction in computing their taxable profits
· Where that additional deduction creates or increases a loss, to surrender losses for a payable tax credit
The Creative Industries Unit is a HMRC team that exists to deal with Television Tax Relief only.
Who qualifies for animation tax relief?
A qualifying animation must be a television programme and not an excluded programme in order to qualify for animation tax relief.
Animations include a number of techniques such as:
· Hand-drawn illustration
· Stop-motion or computer generated images rendered in 2D or 3D
· Using photography to generate individual frames as in stop motion
The relevance on being deemed to be an animation can be important. As animations do not need to meet certain criteria (S1216AB), (6) that are set out for other television, for instance:
· Slot length
· Core expenditure per hour of slot