A Simple Guide to UK Tax Reliefs for the Film, Game, and Music Industries

The UK has become a global hotspot for creativity, producing blockbuster films, chart-topping video games, and world-class music. One reason for this success is the government’s tax relief schemes that encourage investment in these industries. But what exactly are these tax reliefs, and how do they help? Let’s break it down.

What Are Tax Reliefs?

Think of tax reliefs as discounts on the amount of tax a company has to pay. Just like how you might use a coupon to save money at the supermarket, businesses in the UK can use tax reliefs to reduce their tax bills, freeing up money to reinvest in new projects.

How the UK Supports Films, Games, and Music

1. Film Tax Relief (FTR)

Started: 2007

How It Works: Imagine you’re a filmmaker planning to shoot a movie in the UK. To help make your project more affordable, the UK government offers Film Tax Relief (FTR). If your film qualifies as a British film (by passing a cultural test or being part of a co-production treaty), you can claim back up to 25% of the money you spend on making it.

Real-Life Example: Take the movie Slumdog Millionaire, a film that became a global sensation. This movie was partly filmed in the UK and qualified for Film Tax Relief. The savings from this relief helped the producers invest more into the film, contributing to its high production value and eventual success.

Similarly, 12 Years a Slave, which won the Academy Award for Best Picture, benefited from this tax relief. By filming in the UK, the producers could reduce their costs significantly, enabling them to focus on delivering an award-winning film.

2. Video Games Tax Relief (VGTR)

Started: 2014

How It Works: If you’ve ever played a video game, you might not realise that some of your favorite games were made in the UK with help from tax relief. Video Games Tax Relief (VGTR) allows game developers to claim up to 25% of their production costs as long as the game qualifies as British (again, by passing a cultural test).

Real-Life Example: Consider the game Grand Theft Auto V (GTA V). Although the game is set in a fictional version of Los Angeles, much of the development work was done in the UK. By taking advantage of VGTR, the developers could reduce their production costs and focus on making GTA V one of the best-selling video games of all time.

Another example is Batman: Arkham Knight, developed by Rocksteady Studios in the UK. The savings from VGTR helped the developers create a high-quality game that received critical acclaim.

3. Orchestra and Music Tax Reliefs

Started: 2016 (Orchestra Tax Relief), with various music-related reliefs following.

How It Works: These tax reliefs are a bit like having a backstage pass to savings. If you’re organising orchestral performances or working on a musical project, you can claim back up to 25% of your qualifying costs. This relief encourages the production of music and live performances in the UK.

Real-Life Example: While specific examples of music projects using these reliefs aren’t as widely known, many UK orchestras and musical events—like those performing at the BBC Proms—likely benefit from these savings. The relief allows them to focus more on their performance quality and less on financial stress.

Other Tax Reliefs You Should Know About

Apart from the creative industries, the UK offers a range of other tax reliefs that can benefit businesses across sectors.

1. Patent Box

How It Works: If your business holds patents, you can think of the Patent Box as a VIP lounge for your profits. It allows you to pay a reduced tax rate of just 10% on profits made from your patented inventions.

Real-Life Example: Imagine you’re a tech startup that’s invented a new kind of smartphone app. By patenting your technology and using the Patent Box, you could significantly cut your tax bill, giving you more money to invest in further innovation.

2. Research and Development (R&D) Tax Credits

How It Works: R&D Tax Credits are like a reward for businesses that are always pushing the boundaries. If your company spends money on developing new products, processes, or services, you can claim a portion of these costs back as a tax credit.

Real-Life Example: Consider a pharmaceutical company working on a new drug. The research and development process is expensive, but by claiming R&D Tax Credits, the company can recover a significant part of these costs, making it easier to continue their groundbreaking work.

3. Annual Investment Allowance (AIA)

How It Works: Think of AIA as a big shopping spree for your business. If you spend money on new equipment or machinery, AIA allows you to deduct the full cost from your profits before you calculate your tax bill.

Real-Life Example: A small manufacturing company that invests in new machines to increase production can use AIA to write off the entire cost of the machines against their profits, reducing their tax liability.

Why These Reliefs Matter

These tax reliefs aren’t just financial perks; they’re vital tools that help UK businesses grow, innovate, and compete on a global stage. Whether it’s making a blockbuster film, developing a hit video game, or launching a new product, tax reliefs provide the support businesses need to succeed.

By understanding and using these tax reliefs, your businesses can save money and reinvest in their creative and innovative projects. This keeps the UK at the forefront of global creativity and technological advancement.

So, whether you’re in the film, game, or music industry, or running a business in any other sector, make sure to explore these tax relief options. They might just be the boost your business needs to reach the next level.

Stay happy and keep getting money wiser.