Are you missing out on tax breaks to fund new creative activity?

R&D tax relief is a major incentive offered to encourage innovation within Europe. Many high-tech and highly engineered sectors have benefited hugely – and so can businesses in creative industries such as television, film and advertising. R&D tax relief can arise when technical people are identifying problems and coming up with solutions to fix them. Between 25% and 33% of qualifying cost incurred in  developing those solutions, whether they succeed or not could qualify for R&D tax relief, which could translate into a significant cash boost for your business.   

In film, TV and advertising, the need to find innovative solutions to problems can happen in many ways. Take special effects: many post-production companies use Houdini, the 3D animation application software, to create backgrounds, scenery, animals and birds. But what if you want more realistic details or greater variety in the images you’re generating? Proprietary systems can only go so far. If you’re responding by extending the capabilities of the standard CGI systems you use – writing code and developing new software to meet your needs – there is a strong possibility that you are carrying out R&D activity.

Post-production houses could be undertaking eligible R&D in other ways too. 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, and undertaking developments for and around closed box systems.  

Another potential area of R&D activity occurs with media asset management (MAM) systems. 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 – potentially R&D activity again.

Responding to changing environments

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. They 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 (e.g. cable, satellite, mobile or internet) is also creating new headaches for broadcasters and post-production houses. Can quality be maintained when images are viewed on different devices? What are the particular systems challenges facing live broadcasters? Are broadcasters modifying existing systems to make them more robust at times of peak demand and download? If this is what you’re doing, R&D activity is likely to be involved.
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).

A direct cash opportunity

It should now be clear that R&D tax relief is directly relevant to creative sectors such as film, TV, advertising and wider media. Innovative solutions to broadcast, production and post-production problems are being developed all the time. Making a tax claim for the costs of such activity could generate a cash boost to fund new creative projects.

As well as R&D tax credits, other creative sector tax reliefs may also be available, such as Animation Tax Relief, Film Tax Relief, High-end Television Tax Relief, Children Television Tax Relief and Theatre Tax Relief. For advice and help with any of these, please get in touch.

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