R&D relief for creative activities

14 October 2019

The creative industry tax reliefs are valuable to businesses in the film, TV, video games development and wider artistic fields. However, it is not always appreciated that R&D relief may also be available for certain types of expenditure incurred by such businesses. In this article we look at some creative activities that can qualify for R&D relief.

Maximising claims for relief

The creative sector benefits from several specific tax reliefs including Animation Tax Relief, Video Games Tax Relief, Film Tax Relief, High-end Television Tax Relief, Children’s Television Tax Relief, Theatre Tax Relief, Orchestras and Museums and Galleries reliefs. Eligible businesses will, of course, seek to claim these reliefs, but it may also be possible to claim R&D relief on qualifying expenditure.

Where a small or medium-sized (SME) company claims a creative sector tax relief in respect of expenditure incurred on a production, it cannot also claim SME R&D tax relief on that project, as two sets of state aid reliefs cannot be claimed on the same costs.

However, companies which carry out R&D and claim under the Research and Development Expenditure Credit (RDEC) scheme, can also claim a creative sector tax relief. This is because R&D tax relief claimed under the RDEC scheme is not state aid and, therefore, the areas of research and development may be eligible for relief under both the creative sector tax relief and RDEC schemes. However, for Video Games Tax Relief (VGTR), a large company must claim either under the RDEC scheme or, if not qualifying, the costs may qualify for VGTR.

In the following sections consider the types of expenditure in some of the creative industries that can qualify for relief.

Films, TV and advertising

In the film and TV and sectors, there is often a need to find innovative solutions to problems. Taking special effects as an example, many post-production companies use Houdini (the 3D animation application software) to create backgrounds, scenery, animals and birds.

However, proprietary systems can only go so far; if more realistic details or greater variety in the images are required, a company may seek to extend the capabilities of the standard CGI system it is using. If it writes code and develops new software to meet its needs, there is a strong possibility that it is carrying out R&D activity.

Post-production houses could also be undertaking eligible R&D in other ways. These could include:

  • Writing code to enable real-time data visualisation
  • Developing visual sequences covering patterns and/or simulations with or without geographical data
  • Developing algorithms, enhancing or extending animation and graphical rendering software
  • Undertaking developments for and around closed box systems.

Common qualifying technologies used in the post-production and visual effects sector include:

  • Java/Java 3D
  • Jython
  • OpenGL/GLSL
  • Maya3D
  • Python
  • C++
  • Houdini
  • Autodesk
  • Nuke
  • Virtual Machines
  • Micro services.

This list sets out common themes amongst key technologies that have been utilised within the visual effects services sector, but a company is not required to leverage any of the above technologies or languages to qualify for R&D tax relief.

Media asset management (MAM) systems present another potential area of R&D activity. MAM infrastructure needs to respond to the changing demands of modern film development and TV broadcasting. If enhancements are needed, for example, to enable faster uploading of content and the sharing of content between different locations, it is possible that the activity carried out to achieve this will involve R&D. New interfaces may be required to enable in-house MAM systems to interact effectively with those of third parties which, again, is potentially R&D activity.

Broadcasting media streams

The transition from satellite to IP (internet protocol) broadcasting is also triggering innovation and activity potentially eligible for R&D tax relief. Businesses need to create better interfaces between disparate systems in an IP network. With the rise of cloud technology, many companies within this sector are now migrating operations within their workflow to the cloud for access to greater hardware resource without having to financially invest in scaling their own infrastructure. They often need to work with legacy systems, while adapting to new opportunities. The desire to consume media streams in multiple ways on different devices (mobile, tablet, TV, PC etc) using different distribution networks (eg cable, satellite, mobile or internet) is also creating new headaches for broadcasters and post-production houses.

R&D activity is likely to be involved in addressing the following issues:

  • Maintaining quality when content is viewed on different devices
  • Addressing system limitations in an effort to adhere to governance standards, create automation and support faster and more efficient workflows
  • Transition/migration to the cloud and the development and maintenance of Hybrid cloud workflows/solutions
  • Broadcasters modifying existing systems to make them more robust at times of peak demand and download.

Managing and improving production workflows also provides scope for R&D. Enhanced workflows can optimise production timescales and improve speed of delivery – an important differentiator between industry players. Innovation around workflows can also improve file-sharing (in-house and between third parties during co-production), helping to ensure that the final creative outputs can be uploaded successfully in all target outlets (including social media).


R&D tax relief is directly relevant to creative industries including film, TV, advertising, games and wider media activities. Innovative solutions to problems in many areas are continually being developed. Claiming for the costs of such activity could generate a cash boost to fund new creative projects.

For help and advice on any R&D issue, please get in touch with your normal BDO contact, Eyad Hamouieh or Carrie Rutland.

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