Field Fisher Waterhouse LLP was very pleased to be at HM Treasury last week as part of the technical working group shaping the new creative sector tax reliefs.We blogged previously about George
Field Fisher Waterhouse LLP was very pleased to be at HM Treasury last week as part of the technical working group shaping the new creative sector tax reliefs.
We blogged previously about George Osborne's Budget 2012 announcement and the government's plans to introduce corporation tax reliefs for three types of culturally British creative output: animated television programmes, high-end TV productions and video games.
Now that the consultation is open, the technical working group is ironing out the detail of how these reliefs should work. The panel brings together selected advisers such as FFW who are expert in media taxation with three government bodies working very hard to shape the draft legislation: DCMS, HMRC and HMT.
As the consultation document shows, each of the new reliefs will be based on the existing film tax relief as found in Part 15 Corporation Tax Act 2009. The as yet unpublished draft legislation shows that animation tax relief and high-end television tax relief will together form a new Part 15A CTA 2009, whilst a new Part 15B will set out video games tax relief.
The group worked through the consultation document. The session was helpful for exploring and resolving some issues and understanding the policy behind some of the measures.
Definition of animation
The consultation proposes a definition of animation as:
"A sequence of images in 2 or 3 dimensions created by recording still images or objects, one frame at a time, with incremental changes in position, form or appearance between frames to create the impression of movement".
FFW wondered whether this definition, which seems to describe only traditional animation, was intended to exclude computer animation. HMRC confirmed that there was no intention to exclude computer animation from the relief. The panel also discussed whether there was a need to define animation at all.
"Intended for broadcast"
Both animation tax relief and high-end television tax relief will be available for programmes "intended for broadcast". This is the television equivalent of "intended for theatrical release" as found in the film tax relief legislation. The panel agreed that, in these days of technological convergence, it is difficult to define "broadcast" precisely. Without doubt the term includes traditional broadcast, satellite broadcast and cable transmission. Does it include programmes transmitted over the internet, whether to a computer, mobile device or smart TV? The potential problem is that the internet hosts both "proper" programmes which you would expect to benefit from tax relief as well as other clips which you would not.
DCMS and HMRC confirmed that there is no intention to exclude programmes intended for internet broadcast. So programmes for online-only platforms could benefit. DCMS and HMRC are happy that practical barriers such as the cost of production and the requirement for the taxpayer to be incorporated make it likely that only producers of real programmes will benefit from the relief. The panel agreed that "intended for broadcast" should be explained in guidance notes rather than defined in the legislation itself.
The incorporation requirement
The consultation states that only "incorporated companies" will be able to qualify for the new reliefs. It expands by explaining that this "means that the production company must be registered as a company in the UK at Companies House". This requirement seems stricter than the equivalent for film tax relief which allows overseas companies to qualify. HMRC confirmed that the intention is that the qualifying criteria will be the same as for film tax relief, so, for example, overseas companies will be able to benefit.
FFW Tax Deductions will be reporting on further developments in the new creative sector tax reliefs as they occur. In the meantime, we'll share a reminder from HMT that any issues raised in working group sessions should not be considered settled until the legislation becomes law.
We blogged previously about George Osborne's Budget 2012 announcement and the government's plans to introduce corporation tax reliefs for three types of culturally British creative output: animated television programmes, high-end TV productions and video games.
Now that the consultation is open, the technical working group is ironing out the detail of how these reliefs should work. The panel brings together selected advisers such as FFW who are expert in media taxation with three government bodies working very hard to shape the draft legislation: DCMS, HMRC and HMT.
As the consultation document shows, each of the new reliefs will be based on the existing film tax relief as found in Part 15 Corporation Tax Act 2009. The as yet unpublished draft legislation shows that animation tax relief and high-end television tax relief will together form a new Part 15A CTA 2009, whilst a new Part 15B will set out video games tax relief.
The group worked through the consultation document. The session was helpful for exploring and resolving some issues and understanding the policy behind some of the measures.
Definition of animation
The consultation proposes a definition of animation as:
"A sequence of images in 2 or 3 dimensions created by recording still images or objects, one frame at a time, with incremental changes in position, form or appearance between frames to create the impression of movement".
FFW wondered whether this definition, which seems to describe only traditional animation, was intended to exclude computer animation. HMRC confirmed that there was no intention to exclude computer animation from the relief. The panel also discussed whether there was a need to define animation at all.
"Intended for broadcast"
Both animation tax relief and high-end television tax relief will be available for programmes "intended for broadcast". This is the television equivalent of "intended for theatrical release" as found in the film tax relief legislation. The panel agreed that, in these days of technological convergence, it is difficult to define "broadcast" precisely. Without doubt the term includes traditional broadcast, satellite broadcast and cable transmission. Does it include programmes transmitted over the internet, whether to a computer, mobile device or smart TV? The potential problem is that the internet hosts both "proper" programmes which you would expect to benefit from tax relief as well as other clips which you would not.
DCMS and HMRC confirmed that there is no intention to exclude programmes intended for internet broadcast. So programmes for online-only platforms could benefit. DCMS and HMRC are happy that practical barriers such as the cost of production and the requirement for the taxpayer to be incorporated make it likely that only producers of real programmes will benefit from the relief. The panel agreed that "intended for broadcast" should be explained in guidance notes rather than defined in the legislation itself.
The incorporation requirement
The consultation states that only "incorporated companies" will be able to qualify for the new reliefs. It expands by explaining that this "means that the production company must be registered as a company in the UK at Companies House". This requirement seems stricter than the equivalent for film tax relief which allows overseas companies to qualify. HMRC confirmed that the intention is that the qualifying criteria will be the same as for film tax relief, so, for example, overseas companies will be able to benefit.
FFW Tax Deductions will be reporting on further developments in the new creative sector tax reliefs as they occur. In the meantime, we'll share a reminder from HMT that any issues raised in working group sessions should not be considered settled until the legislation becomes law.