As R&D tax consultants, we have noticed that many accountants are often unsure about how to support businesses in creative industries.
This is largely due to the seemingly damning rule that advances sought in the arts, humanities, and social sciences are automatically ineligible.
This rule seems at odds with the newly announced guidance that will be released later this year, indicating the ways that creative industries could benefit from R&D tax relief.
We are going to cut through the confusion and help you understand whether your clients in creative industries are eligible for R&D tax relief and what changes could be in store later in the year.
Are the creative industries exempt from R&D tax relief?
While there are some sectors that will likely never qualify for R&D tax relief, some innovative businesses may be missing out.
In particular, video game developers sit in the unique position of being a creative yet scientific industry where both artistic and technological innovation go hand-in-hand.
Filmmakers might also find themselves pushing boundaries of science and technology if they seek to use and develop innovative systems to aid in their filmmaking.
However, the line between scientific and artistic development can become blurred, particularly when it comes to attributing costs to the work undertaken.
There is little doubt that there are technological advancements in these creative industries, compare Pong to Grand Theft Auto VI, so it is hoped that the new guidance will make it easier for those working in these sectors to make claims.
How can I prepare for the new R&D tax relief guidelines?
If you have any clients who work in creative industries, it may be worth alerting them to the upcoming changes.
Where possible, it would be wise for businesses in creative industries to wait until the new guidelines are issued before making a claim.
This is because the new guidelines will likely provide a better framework for constructing narratives and will provide clarity on ascribing costs.
Only those businesses that have done innovative work that will fall out of the scope for claiming should attempt to file an R&D tax relief claim now, before the ability to claim for the work is lost.
These businesses will need support as they will have to continue working under the existing rules, wherein there is an inherent prejudice against creative industries.
Knowing that these changes are coming means that you can guide your clients on better record-keeping so that they can file a more successful R&D tax relief claim when the time comes.
We know that the claim will need to meet the standard criteria for R&D tax relief claims, so should highlight the advance being sought, the technological uncertainty, and the role of the competent professional.
Alongside this, companies should track the time spent working on technological advancements and try to keep it separate from purely artistic work.
We are on hand to help you navigate these exciting changes.
As an R&D tax consultant, we are always happy to see innovation being rewarded and look forward to exploring the new guidelines as they emerge later in the year.
Be sure to keep an eye on our news page for a more detailed breakdown once the guidance is released.
