What is Tax Relief?
In 2006 the Film tax relief was introduced through the Finance act 2006. From its incredible success in 2013 a similar tax relief was generated and aimed at High-end programmes and Animation which structure was like that of the already existing Film tax relief. The reliefs were available on 1st April 2013 and after. And has been described by some as the most ‘generous’ in the world – it will give those producers and creators away from the UK an incentive to come and employ staff here as well as spending in the UK economy. It is a deal which will mean a better chance for our creative industry to compete with other countries which already have similar tax breaks already such as Canada and Japan. The aim of of this new structure is to gain that extra employment for a business (animation) which is struggling already to compete on a global scale – employment as well generating more business in the UK, which will create more jobs for those hopefully employed – and drive much more money into the UK economy. The creative sectors in the United Kingdom are one of the most important to our economy and brings 36 billion into the British economy each year and employs around 1.5 million – Our creative industry and services are some of the greatest and our high quality productions – therefore the use of Tax reliefs or otherwise know Tax breaks, will mean that more investment will be built here instead of elsewhere for a cheaper price. To protect our world renowned success and see it continue – for animation in particular it could restore and help keep it afloat. Even though our animation industry is extremely successful and the use of technology its being persuaded elsewhere for a better deal.
(source of quote: http://www.harbottle.com/uk-tax-credits-for-animation-and-high-end-television-confirmed/)
“20% of a film’s expenditure to be incurred outside the UK without affecting the maximum tax relief available.
Producers will benefit from a payable tax credit of 25% of the lower of:
(a) the programme’s UK qualifying expenditure, and
(b) 80% of all that programme’s qualifying expenditure;
which means that 20% of a programme’s qualifying expenditure could take place outside the UK without affecting the maximum tax credit available.
As an alternative to claiming the payable tax credit, producers have the option of benefitting from an additional deduction from their corporation tax. This is on a par with the existing film tax relief, although producers have almost always opted for the payable tax credit.
The Reliefs only apply to qualifying expenditure in the UK, being production expenditure on pre-production, principal photography and post production of the programme. “
Qualify as British
In order to gain British Animation Tax Relief, productions must qualify as British. There are two ways which this can be done: Either through the Cultural test OR by gaining a UK’s official bilateral co-production agreements which will allow the television co-production. In order to pass the cultural test and apply for the Animation programme to be British they must pass something known as the cultural test. They must gain 16 points out of a possible 31, which will qualify the work as British:
“To apply for the cultural test for animation, there must be one animation production company (APC) that is registered with Companies House and within the UK corporation tax net. The APC must be set up before key animation begins and have responsibility for all aspects of the programme-making process from pre-production through to delivery.
The cultural test for animation programmes is a points-based test where the project needs 16 of a possible 31 points to pass. It comprises four sections:
- Cultural content (up to 16 points).
- Cultural contribution (up to 4 points).
- Cultural hubs (up to 3 points).
- Cultural practitioners (up to 8 points).”
Below is the detailed table of these 31 points (taken from the BFI website) which these productions can try to gain in order to get the Tax relief for animation. One of the good points which is noted on the first two points in section A (A1 &A2) expresses that the animation must be ” Set in the UK or an EEA state or (Up to 3 points will be awarded for set in an undetermined location… Lead characters British or EEA citizens or residents (or characters from an undetermined location),” which will mean that productions can also set there animations in made up or undetermined lands (therefore not tied down to created a fully British animation around just our country. This is a very important point as it will be a lot more popular from those across the world. The other points in the Tax relied, cultural test highlights and promotes the use of British staff in the production of animated programmes and promotes the creativity of the English – all of these points show that the tax relief isn’t just bring money to the UK but also promoting the British creative Industry and the ideas which we carry.
|Section A -Cultural content|
|A1||Set in the UK or an EEA state or (Up to 3 points will be awarded for set in an undetermined location)||Up to 4 Points|
|A2||Lead characters British or EEA citizens or residents (or characters from an undetermined location)||Up to 4 Points|
|A3||Animation based on British subject matter or relates to an EEA state or underlying material||4 points|
|A4||Original dialogue recorded mainly in English language||Up to 4 Points|
|Section B – Cultural contribution|
|B||Programme represents/reflects British creativity, British heritage or diversity||Up to 4 Points|
|Section C – Cultural hubs|
|C1||At least 50% of the animation shooting or visual design or layout &storyboarding or VFX takes place in the UK||2 points|
|C2||At least 50% of the music recording or audio post-production or picture-post production or voice recording takes place in the UK||1 point|
|Section D – Cultural practitioners|
|D1||1 of the 3 lead directors is an EEA citizen or resident||1 point|
|D2||1 of the 3 lead scriptwriters is an EEA citizen or resident||1 point|
|D3||1 of the 3 lead producers is an EEA citizen or resident||1 point|
|D4||1 of the 3 lead composers is an EEA citizen or resident||1 point|
|D5||1 of the 3 lead actors/voiceover artists is an EEA citizen or resident||1 point|
|D6||At least 50% of the cast are EEA or residents||1 point|
|D7||At least 1 of the 7 key HoDs is an EEA citizen or resident||1 point|
|D8||At least 50% of the crew are EEA citizens or residents||1 point|
(Table Source: http://www.bfi.org.uk/film-industry/british-certification-tax-relief/cultural-test-animation-programmes/summary-points-cultural-test-animation-programmes)
Requirements of using Tax Relief:
- Must be intended for broadcast
- Must qualify as British from one of two ways (e.g Cultural test)
- 25% (at least) of core expenditure must relate to goods and services consumed in the UK
- The production must be a company which is taxable in the UK and must be involved in the Production.
- Must be animated but can be ‘mix medias’
- Must comply with the animation exclusions: cannot claim tax relief for advertising, game show, variety show, panel show, broadcasts live, news, current affairs, competitions, animated pornography and training videos
2015 MOST RECENT NEWS:
- “Reduction of the minimum expenditure requirement from 25% to 10%.
IMPACT ON ANIMATION COMPANY
(All information and diagrams taken from BFI overview: http://www.bfi.org.uk/sites/bfi.org.uk/files/downloads/economic-contribution-of-the-uks-film-high-end-tv-video-game-and-animation-programming-sectors-report-2015-02-23.pdf)
in the UK in 2011 was approximately £46 million. The fact that animation programme production expenditures during 2013-14 were £51.7 million suggests that the additionality rate during the first year of the ATR was 11%…In total, the animation programme sector generated 4,700 FTEs of employment, £171.1 million in GVA and £52.0 million in tax revenue for the UK economy in 2013 … animation programme production, we estimate that £51.7 million in production expenditures would have triggered £10.3 million in claims. Based on an additionality rate of 11%, the ATR generated £10.9 million in additional GVA in 2013- 14.
Therefore, £1 of tax relief resulted in £1.06 of GVA for the UK economy…When considering that the economic activity generated by animation programmes resulted in an estimated £29.7 million in tax revenue, then it can also be concluded that the £10.3 million in estimated ATR generated £3.3 million in tax revenue (11% × £29.7 million). Therefore, £1 of tax relief returned £0.32 to the Exchequer.”
Animation Magazine stated: “A total of 16 animation programs have received official certification from the British Film Institute, the first step in accessing the U.K.’s competitive new tax relief, and a further eight have received letters of comfort confirming they qualify as British and will be eligible for the tax relief.” (http://www.animationmagazine.net/tv/sixteen-animated-projects-receive-u-k-tax-relief/). Already animated programmes are being put forwrd (which before the tax relief were either cancelled or sent to other locations around the world. Tax Relied has been an important incentive bringing work to the UK – and so the animation industry is again soaring for a country filled with high quality track record for animation. This will mean more jobs and prospects to animators. Some of the programmes in line for the UK animation include The Clangers (Co- produced among Cbeebies, Coolabai, Smallfilms and sprout), Danger dog (Cornwall based company), and many more from an array of companies from all over the UK. The projects for the UK has defiantly increased due to tax relief which was only introduced by the government in 2013 – the keen interest in creating works in the UK can only mean positive things for the animation industry. The industry over recent years, (before the introduction of tax relief) has been a tough fight, as sending work to Canada and to the East has been a issue where work can be created for less. However – the UK has a reputation for high quality animation and film – and so surely (and what is evident) the introduction of Tax Relief will mean a boast in the animation industry and to the economy / creative sector. Popular and top children’s channels such as Cbeebies were noted to be repeating the same programmes over and over such as Teletubbies and the Tweenies – however now they have been able to start creating new ideas for a new generation.
Above is a diagram and case study of the benefits that Tax Relief has had for our creative industry. We can also see the impact of tax relief in all areas of animation: The main being: TV broadcasting, Merchandise, Video Platforms, Multiplier effects and Production. Although it is only the smallest one on the list there is no doubt that the tax relief has created more opportunities in the UK. Furthermore there has been an increase in those employed within the animation sector.