Specialist R&D Tax & Grant Funding Advisors
Welcome to our comprehensive guide on Animation Tax Relief (ATR) in the UK. We aim to decode its complexities and showcase how your animation business can optimally leverage this incentive for financial growth and stability.
Are you an animation company in the UK looking to increase your profits and improve your cash flow? Have you heard about the Animation Tax Relief (ATR) but unsure how it works or if your company is eligible? Look no further than this guide to maximising your profits through ATR.
With this blog, we aim to provide a comprehensive guide to Animation Tax Relief for UK animation companies. We'll cover what ATR is, who can avail of it, and how to claim it successfully. We'll also discuss the impact of ATR on the UK's animation sector, the potential pitfalls to avoid when applying, and the future of ATR in light of changing policies.
Animation Tax Relief (ATR) is a government initiative that reimburses qualifying animation companies up to 25% of their total qualifying animation expenditure. Introduced in 2013, it was designed to encourage and support the UK's animation sector, which has seen a 20% increase in the number of animation programmes produced since its inception. ATR targets companies that produce animation programmes in the UK and aims to offer a valuable opportunity to claim back a substantial portion of production costs.
To qualify for Animation Tax Relief, you need to meet the following criteria:
Applying for ATR requires careful documentation and adherence to specific procedures. Companies must prepare and maintain records of all qualifying costs, such as pre-production, principal photography, and post-production costs. They must make their application through their Corporation Tax return (or amended return) and adhere to the process handled by HM Revenue and Customs (HMRC).
Hence, it is essential to understand the financial impact of ATR on your business. The potential savings from ATR can be significant, making a difference in your company's budgeting and overall financial planning.
Animation Tax Relief (ATR) has had a broad and positive impact on the UK animation industry since its introduction in 2013.
The scheme has provided an excellent opportunity for UK animation companies to produce their content domestically while also reducing their tax liabilities. This has stimulated the local animation industry, attracting new companies to set up and produce their content in the UK.
ATR has also enabled UK animation companies to remain competitive on the global stage, as evidenced by success stories such as Aardman Animations, creators of Wallace and Gromit.
They have publicly cited ATR as a factor that allowed them to maintain their competitiveness and continue producing high-quality content. Other UK animation companies have also benefited from ATR, such as Blue Zoo Animation Studio, who reported that ATR helped them to expand their workforce and invest in more ambitious productions.
The scheme has not only boosted the production of animation programmes in the UK but has also enabled UK businesses to remain competitive globally. These benefits are a testament to the success of the ATR scheme and its role in supporting creative industries in the UK. As the future of ATR unfolds, it is imperative for companies to stay informed and take advantage of the opportunities it provides, continuing to drive growth and innovation in the industry.
Qualifying for Animation Tax Relief (ATR) requires strict adherence to eligibility criteria set forth by the UK government.
The eligibility requirements are based on two primary factors: the content of the animation programme and the proportion of the expenditure.
The programme must be intended for broadcast, including internet-only broadcast, and a minimum of 51% of the total core expenditure must be on animation. Furthermore, the content of the animation programme must not be advertisements or promotional programmes, news, current affairs or discussion programmes, quiz game shows, or events or performances of a competitive nature. The animation programme must also be made for commercial purposes and not for research or training.
The proportion of the expenditure is also a crucial eligibility factor. A minimum of 10% of the core expenditure must be UK expenditure, spent on goods or services that are used or consumed in the UK. The remaining expenditure can either be incurred within or outside the UK. It is essential to keep detailed records of all qualifying costs, such as pre-production, principal photography, and post-production costs.
Moreover, the programme must pass the cultural test, a points-based test that measures the programme's cultural contribution to the UK. This test determines if the programme meets UK content and cultural requirements and is an essential criterion for eligibility. The cultural test is conducted by the British Film Institute (BFI) and assigns points based on various parameters, including the location of the filming, the nationality of the cast and crew, and the subject matter.
Your company must also:
Animation programmes commissioned together are treat as one programme.
Your company cannot claim the relief if the programme:
Qualifying for ATR requires in-depth knowledge of the eligibility requirements and stringent documentation procedures. Careful planning and expert advice can go a long way in ensuring a successful application. As ATR has significantly stimulated the UK's animation industry, companies must keep up with any changes in policies and be informed of the potential benefits and implications of this initiative on their finances.
Applying for Animation Tax Relief (ATR) can be a significant step in maximising your animation company's profits. However, the process can be complicated, and missing or misunderstanding any of the eligibility requirements and necessary documentation can result in unsuccessful claims. This step-by-step guide outlines the application process and the documents required, making it easier for you to navigate the process and make successful claims.
To apply for ATR, the animation programme must meet several requirements, including being intended for broadcast and having at least 51% core expenditure on animation. Your company must also meet certain criteria, such as being responsible for producing the animation programme, having an active trade in the UK, and having a significant role in the production process. It is essential to understand the full eligibility criteria before proceeding with the application process.
To apply for ATR, companies need to prepare and maintain records of all qualifying costs, such as pre-production, principal photography, and post-production costs. It is crucial to ensure these records are organised and easily accessible before starting the application process.
To pass the cultural test, your animation programme must obtain enough points based on its contribution to British culture. Points are granted for factors such as the location of the production, cultural content, and personnel used in the project.
Once all the necessary documentation is gathered, companies can apply for ATR through their Corporation Tax returns or amended returns. It is essential to ensure that you have accurately recorded all qualifying costs and passed the cultural test before submitting your application.
HM Revenue and Customs (HMRC) are responsible for handling the ATR application process. Upon submission of the application, you should expect to receive a notification of receipt from HMRC. HMRC will then process your application, and if successful, they will apply the tax relief to your Corporation Tax return. If your application is not approved, you will receive written notification with explanations.
To make a successful ATR claim, you need to keep accurate records and submit the following documents:
Once you have gathered all the necessary documentation, you can submit them electronically through the HMRC website. Alternatively, you can submit them via mail to the HMRC Animation team.
Animation Tax Relief is an invaluable opportunity for UK animation companies, but the application process can be complicated. By following this step-by-step guide and submitting the necessary documents, you can successfully apply for ATR and take advantage of the tax relief. It is always recommended to seek expert advice to help steer your company through the intricacies of the ATR application process.
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Understanding the financial impact of Animation Tax Relief (ATR) on your business is crucial for maximising the benefits of this government initiative. The potential savings from ATR can be significant, making a difference in your company's budgeting and overall financial planning. By claiming back up to 20% of their total qualifying animation expenditure, many UK animation companies have managed to save a considerable amount of money, increasing their profits and cash flows. For example, Aardman Animations claimed £1.4 million in ATR for their Shaun the Sheep movie, which was a significant boost to the company's finances.
Apart from Aardman Animations, there are many more successful case studies of UK animation companies leveraging ATR for financial benefits. For instance, Illuminated Films claimed £91,000 in ATR for their Do You Know? show, which helped them to fund future projects. Also, Blue Zoo Animation Studio managed to claim £5.3 million in ATR for their Digby Dragon show, enabling them to hire more staff and expand the company.
Furthermore, ATR has many indirect financial benefits for UK animation companies. For instance, the increased investment in the local animation sector has created new employment opportunities, brought in foreign investment, and boosted the country's economy. It has also encouraged more companies to set up shop in the UK and produce high-quality animation programs, making the country a more attractive destination for investment.
The financial impact of ATR on UK animation companies is immense, and it's essential for companies to understand and leverage its benefits. By claiming back up to 25% of their total qualifying animation expenditure and adhering to the eligibility requirements, many companies have saved significant amounts of money, increased their profits, and achieved their financial goals. Consequently, ATR has played a significant role in supporting and stimulating the local animation industry, creating a win-win situation for both businesses and the UK economy.
While Animation Tax Relief (ATR) offers a valuable opportunity for UK animation companies to reduce their tax liabilities, there are common mistakes that companies must avoid when applying. One potential mistake is not maintaining proper documentation of all qualifying costs, such as pre-production, principal photography, and post-production costs.
Companies must keep these records up-to-date to avoid unsuccessful claims. Additionally, misunderstanding the eligibility requirements can lead to unsuccessful claims. It's essential to note that the animation programme must be intended for broadcast, and at least 51% of the total core expenditure must be on animation. Furthermore, the programme must pass the 'cultural test,' which measures the programme's cultural contribution to the UK.
Expert advice can be helpful to avoid these mistakes and to navigate the application process smoothly. Professional tax advisers can help companies to prepare and maintain records of all qualifying costs. They can also provide guidance in understanding the eligibility requirements and the cultural test. Besides, professional advisers can review and validate the application before submission and ensure that companies avoid any inconsistencies or errors.
Avoiding common mistakes and seeking expert advice can help UK animation companies maximise the benefits of Animation Tax Relief. As this relief continues to stimulate the local animation industry, it's essential for companies to keep proper documentation of all qualifying costs, understand the eligibility requirements, and seek professional advice.
Mishandling the ATR application process can lead to unsuccessful claims and could negatively impact a company's finances. Therefore, it's in their best interest to have a thorough understanding of the process and ensure that their application is correct and complete.
The future of Animation Tax Relief (ATR) is an important consideration for UK animation companies. While ATR has provided immense benefits since its inception, changes in policies and their implications should be monitored continuously. In 2020, the UK government introduced the Video Games Tax Relief Changes (VGTR), which will also affect ATR. With the changes, it is now mandatory to spend a minimum of 25% of core expenditure on UK expenditure. The changes, aimed at increasing the capabilities of British talent in both sectors, will have a significant impact on how companies can claim ATR.
It is also essential to stay updated with changes in policies and regulations surrounding ATR. For instance, in March 2023, the chancellor announced at the spring budget that, following a public consultation, the film, TV and video games tax reliefs will be reformed, becoming expenditure credits instead of additional deductions from 1 April 2024. The new Audio-Visual Expenditure Credit will replace the current film, high-end TV, animation and children’s TV tax reliefs. This means that production companies will be granted the money ahead of their production as opposed to being able to claim it back after it has been spent on the production – good news for cash flow.
Film and high-end TV will be eligible for a credit rate of 34% and animation and children’s TV will be eligible for a rate of 39%. The expenditure threshold for high-end TV will remain at £1 million per hour.
Staying updated with ATR will ensure that UK animation companies can maximise its benefits. It is also essential to understand the impact of the changes on your business and how to adjust accordingly. To stay updated with ATR and VGTR changes, companies should visit the UK Government's Tax Relief for Creative Industry page, which provides up-to-date information and guidance on any changes or updates.
While ATR has been a significant financial support for UK animation companies, policy changes and their implications call for businesses to keep updated. Alongside policies, other industry dynamics, trends, and technological advancements can also come into play, affecting how animation productions are treated by the tax relief system. Therefore, staying abreast of any changes in policies and regulations governing ATR means that companies can continue to benefit from it.
In conclusion, Animation Tax Relief is a valuable initiative that UK animation companies should consider to maximise their profits and maintain healthy cash flows. This government scheme provides tax advantages, allowing qualifying companies to claim back up to 25% of their total qualifying animation expenditure. However, it is essential to note that specific eligibility requirements must be met, such as the content of the animation programme, the broadcasting intent and proportion of expenditure.
Since its introduction, the scope of ATR has been broad and impactful, stimulating the local animation industry. Moreover, the potential savings from ATR can be significant, making a difference in a company's budgeting and overall financial planning, as seen in successful case studies of UK animation companies leveraging ATR.
To apply for ATR, careful documentation and adherence to specific procedures are necessary. Companies must prepare and maintain records of all qualifying costs and make applications primarily through their Corporation Tax return. However, mistakes when applying for ATR should be avoided to ensure successful claims.
In the future, companies should continuously monitor changes in policies and their implications to maximise the benefits of ATR. The UK Government can make ATR more accessible and attractive to UK animation companies by continually providing support in the form of clear guidance and relaxed eligibility requirements.
Animation Tax Relief - GOV.UK: https://www.gov.uk/guidance/claiming-animation-tax-relief-for-corporation-tax
This is the official government resource page on ATR. It provides detailed and up-to-date information on eligibility criteria, application process, and how to claim the tax relief.
Creative Industries - Tax Reliefs - GOV.UK: https://www.gov.uk/guidance/corporation-tax-creative-industry-tax-reliefs
This resource page provides information on all the creative sector tax reliefs in the UK, including animation. It highlights the various tax reliefs that companies can benefit from and provides further links to relevant resources.
Animation UK: https://www.animationuk.org/
Animation UK is the industry body for animation in the UK. Their website offers a wealth of information about the animation industry, including ATR. They also provide support and advice to animation companies, helping them navigate the industry successfully.
Gov.uk - Creative industries statistics commentary: August 2022 - https://www.gov.uk/government/statistics/creative-industries-statistics-august-2022/creative-industries-statistics-commentary-august-2022
This is an Official Statistics publication produced by HM Revenue and Customs (HMRC). It provides information on the number and value of claims for film, high-end television, animation, video games, children’s television, theatre, orchestra, and museums and galleries exhibition tax reliefs, for the financial years up to March 2022.
Animation tax relief is one of the UK government’s most generous tax reliefs, but making a claim isn’t always easy. Animation tax advisers will 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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