Specialist R&D Tax & Grant Funding Advisors
The government, keen to support the growth of the creative industry, have paid out over £1.3 billion in R&D tax relief to encourage research and development projects across the whole of the creative industry
Experts believe that by 2025, the creative industry will be generating over £132.1 billion, making it one of the fastest-growing industries and one of the biggest contributors to the UK’s economy.
The government, keen to support its growth, is therefore encouraging research and development projects across the whole creative industry. In fact, just last year, it rewarded creative companies with over £1.3 billion in R&D tax relief, an increase from £1.11 billion from the year before.
Under the government-funded R&D tax relief scheme, creative companies can claim up to 33% of eligible costs associated with the research and development of their innovative projects.
So, from the production of off-the-wall films to the introduction of virtual reality for museums and galleries, what exactly did the creative industry claim for last year, how much did HMRC award these companies for their creative inputs and what was the impact of COVID?
From arts and crafts to fashion and literature, any business that’s centred around creativity falls under the ‘’creative industries’’ umbrella.
However, companies within the following sectors are key drivers when it comes to innovation and has specific R&D tax relief incentives to help them cover the costs of developing their high-risk, high reward, innovations:
Let’s look at each sector and find out how much they claimed last year, how many projects they completed, and how much funding they received from the government.
Film tax relief (FTR) was first introduced in 2007 and allows film production companies to claim up to 33% of the eligible costs associated with their innovative film and film production projects.
Since the start of the scheme, film production companies have made 3,845 R&D tax relief claims and received over £20.2 billion from HMRC to fund their R&D projects.
Throughout 2020, the government paid out £611 million in film tax relief, and out of the 900 claims made, 67% were under the £100,000-mark.
High-end TV (HETV) tax relief allows production companies to make a deduction in their taxable profits or surrender a loss for a payable tax credit to produce their innovative, high-end tv programmes.
The HETV tax relief scheme was first introduced in 2013 and since then, high-end TV production companies have made 760 claims and received £7.9 billion worth of funding from the government.
Last year the government paid out £380 million, in the form of R&D tax relief, to support the production of 315 high-end TV programmes. This was an 18% increase from the year before, which demonstrates how much this sector is growing.
Animation tax relief (ATR) allows qualifying animation companies to make a deduction in their taxable profits or to surrender a loss for a payable tax credit.
Since ATR was introduced in 2013, 360 R&D tax claims have been made, and the sector has received £593 million in R&D funding.
Last year, companies within this sector made 90 claims and were awarded a total of £18 million to support the making of 100 animated programmes.
Video games tax relief (VGTR) supports UK game developers by offering them a tax rebate against the money they spend on the design, production and testing of new video games.
Since VGTR was introduced in 2014, video game developers have made 1,640 games with £4.4 billion worth of R&D funding from the government.
The video game sector is expanding rapidly: 350 claims were made and £180 million was paid out to this sector last year, which is an increase of 48% from the previous year.
The majority of VGTR claims tend to be for smaller amounts, with 47% of all claims being for £50,000 or less.
Children’s television tax relief (CTR) is an extension of the HETV tax relief but is specifically aimed at children’s TV programme producers. Last year these TV production companies received £19 million from the government to produce 105 children’s programmes, with most claims coming in under £500,000.
Orchestra tax relief (OTR) was first introduced in 2016. And, unlike other creative sectors, orchestral production companies don’t need to pass a cultural test to be able to claim R&D tax relief. Plus, an R&D claim can cover several different stages of production, so companies within this sector could receive pay-outs at different times during the production process.
Since the OTR scheme started, the sector has won over £52 million in R&D tax relief which has funded 2,120 productions.
During 2020, 175 claims were made by orchestral production companies, and £11 million of R&D funding was awarded, which supported 750 productions.
Like orchestral production companies, theatrical production companies aren’t required to pass a cultural test to file an R&D tax claim. They can also make several claims across the various stages of a production process.
Theatre tax relief (TTR) came into practice in 2014, and since then, 4,710 claims have been made and HMRC has paid out £354 million to support 15,725 productions.
Just last year, £74 million worth of TTR was paid to fund 1,070 claims which supported 3,660 productions.
Since 2017, when the museums, galleries and exhibitions tax relief (MGETR) first started, museums, galleries and exhibitors have received £34 million in R&D funding that paid for 415 claims and funded 2,910 exhibitions.
Despite the R&D tax relief incentive only being available to charitable companies and the amount of claimable tax relief being capped at £100,000 (touring) or £80,000 (non-touring), last year, the sector made 190 claims and received £14 million from the government.
So, we know the number of claims and the amount of R&D funding each sector has received. But which is the most innovative sector within the creative industry?
The film industry made 900 R&D claims last year and received nearly half the amount that was paid out to the creative industry as a whole.
However, out of the 3,155 claims that were made across all sectors within the creative industry, it was the theatre industry that made the most: they submitted and won funding for 1,070 claims across the whole of 2020.
Of course, we can’t talk about last year without mentioning COVID-19. The social distancing and isolation enforcements that were in place for most of 2020 destroyed businesses across all industries. Especially those that relied on human footfall to survive, like those within the creative industry: Theatres, museums and galleries, for instance.
So, how has this impacted R&D?
The truth is, we won’t find out until this time next year. Claims from last year were made for the innovative work completed in 2019, so we won’t understand the true impact of the pandemic until 2022.
For now, though, we can safely say that the amount of R&D funding awarded to businesses within the creative sector has risen from £1.11 billion to £1.3 billion over the last year.
Fingers crossed for next!
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