Specialist R&D Tax & Grant Funding Advisors

A quick guide to animation tax relief

ATR is a generous tax relief offered to production companies that can go a long way in reducing costs.

Barrie Dowsett

Chief Executive Officer

21/11/2022

10 minute read


Think back to our childhoods (or our children’s childhoods!) and TV favourites like Noddy, Thomas the Tank Engine and Bob the Builder are sure to feature somewhere. Great, successful animations loved by parents and children the world over.

Quintessentially British – or so you’d think. But in fact, although culturally very British, all three of them were filmed in other countries including Canada and the US. Why? Often because of these countries’ attractive animation tax reliefs and subsidies.

With this in mind, just over a decade ago fear began to build that the next crop of talented British animators would always end up looking to move abroad to chase success. Add to this the fact that animation production companies can often struggle to obtain funding and you’ll see how challenging the UK animation industry can be.

Therefore, back in 2012 the government revealed its plan to offer a new animation tax relief (“ATR”). The aim of the relief was to re-establish and cement the UK’s footing as a world-leading producer of educational, fun and high-quality children’s entertainment. The news went down well with production companies and since its 2013 launch ATR has gone from strength to strength. No doubt it’s served to invigorate the industry, helping production companies secure funding from private investors and UK broadcasters that wasn’t there before.

In this article we look in more detail at how animation tax relief works, who can benefit and how to claim.

How does animation tax relief work?

Animation tax relief provides UK animation production companies with a tax rebate against money they’ve spent on the pre-production, principal photography and post-production of a new animation project. It's worth as much as 25% of the core production costs of an animation project.

Production companies can claim ATR on whichever is the lower:

  • 80% of the total core expenditure
  • The total core expenditure incurred in the UK

If the production is profitable, ATR is an effective way of reducing the company’s Corporation Tax bill. If the company has made a loss on the animation, it can still claim a cash payment courtesy of HMRC at a rate of 25%.

How do I access animation tax relief?

Animation productions must meet the following criteria in order to be eligible for animation tax relief:

  • The intention must be for the programme to be broadcast (this must be TV for example, not just on the internet)
  • The children’s television production company (CTPC) that created the programme must be subject to UK Corporation Tax
  • The production must be certified as British, either by passing the Children’s Television Cultural Test or qualify as an official co-production (with treaty partners that allow for television)
  • The programme must be targeted at an audience of age 15 or below
  • A minimum of 10% of the core expenditure must be UK expenditure
  • A minimum of 51% of the total core expenditure must be on animation

It is worth noting that animation tax relief and children’s television tax relief does not meet the threshold of £1million per programme hour. In other words, the £1million per programme hour rule doesn’t apply.

The 30 minute slot threshold that applies to high end TV tax relief also doesn’t apply to ATR.

When can animation tax relief not be claimed?

ATR cannot be claimed if the programme:

  • Is centred around current affairs, news or discussion
  • Was designed for promotional or advertising purposes
  • Is a game or quiz show, variety show, panel show or similar programme (particularly if the prize money is over £1000)
  • Was produced for training purposes
  • Has any element of contest or competition
  • Broadcasts live events, including artistic and theatrical performance

More information can be found in the government’s Animation Production Company Manual.

What is the process for claiming animation tax relief?

Claims for animation tax relief should be made as part of your Company Tax Return (CT600).

You need to be registered as a UK company before you can start your ATR claim. You’ll also need the following documents to hand:

  • Your BFI cultural certificate to show your programme is “British”.
  • Statements showing your core expenditure, broken down by category. It should also be clear what spending took place in the UK and what took place outside of the UK
  • A profit and loss account for each animation programme produced (each programme must be reported to HMRC as a separate trade).

You’ll need to calculate if your animation programme has made a profit or a loss. This will then determine whether your animation tax relief claim can be used to reduce your tax bill, or whether it should be surrendered as a loss for a cash credit.

HMRC has a very specific method to calculate the taxable profit and loss of an Animation Production Company (APC). Restrictions also exist around the way losses can be used, depending on whether the programme is finished for example.

Why use a specialist ATR claims consultancy?

Animation tax relief is one of the UK government’s most generous tax reliefs, but making a claim isn’t always easy. Any specialist ATR claims consultancy worth its salt will only charge a fee on success. They will also handle your claim on your behalf from start to finish, meaning your time can be better spent elsewhere.

At Myriad Associates, our experienced team can identify all of your eligible projects and expenses so nothing is left behind. This means we can maximise your claim far more effectively than many in-house teams and general accountants.

Don’t forget to take a look at our animation tax relief webpage for more information. If you think your company qualifies for animation tax relief or you’d simply like to ask a question, feel free to get in touch with our experts. You can call us on 0207 118 6045 or drop us a message and we'll call you back.


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