How to Calculate Creative Tax Reliefs

Claiming creative sector tax reliefs requires more than knowing the rate. Film, TV, video game and cultural event producers can access tax credits from the UK government, but they need to get the tax treatment right to protect that claim and make the most of it.The calculation method itself, particularly for productions that span multiple accounting periods, catches many companies out.

This guide explains how to calculate the legacy creative tax reliefs accurately, covering Film, Animation, High-End TV, Children's TV, Video Games, Theatre, Orchestra, and Museums and Galleries.

Which scheme should you use?

UK creative tax reliefs currently operate under two generations of legislation: deduction-based schemes and expenditure credit schemes.

The British government offers deduction-based tax incentives for the following types of productions:

• Films
• Animations
• High-End Television Programmes
• Children’s Television Programmes
• Video Games
• Museum & Gallery Exhibitions
• Theatre
• Orchestra

There are specific requirements for each scheme that differ across the range.

The first five in this list are being phased out and replaced by the Audio-Visual Expenditure Credit (for the first four) and the Video Games Expenditure Credit (as you may have guessed, for video games).

Companies may only opt into the expenditure credit schemes for accounting periods ending on or after 1 January 2024. They can only claim for expenditure incurred on or after this date, too.

Expenditure credit schemes are calculated in a different way to the deduction-based tax reliefs, as they are treated as above-the-line income.

How are deduction-based tax reliefs calculated?

Deduction-based tax reliefs are claimed on your Corporation Tax Return (CT600), which you file with HMRC each accounting period. Each production is treated as a separate trade for tax purposes, with its own profit and loss account.

A key feature of these schemes is that they are calculated on cumulative costs, not just the costs incurred in a single period. Each year, you sum all costs from the start of the production to date, then subtract costs already claimed in previous periods to find the deductible amount for the current period.

The qualifying expenditure cap

You can claim an additional deduction based on the lower of:

• 80% of total core costs
• the amount of eligible core costs (European expenditure for accounting periods before 1 April 2025; UK expenditure for periods from 1 April 2025)

If all your eligible costs are from the UK (or EU, for some earlier periods) and they exceed 80% of total costs, the 80% cap applies. If your eligible costs are below 80% of total costs, you can only claim the eligible cost amount.

The additional deduction

The additional deduction is a notional extra deduction on top of the normal 100% deduction for costs. It reduces taxable profits (or increases a loss) without affecting your statutory accounts.

Essentially, you can reduce your Corporation Tax bill by the amount of your qualifying costs.

Profit-making companies see a reduction in their corporation tax bill; loss-making companies can surrender their qualifying loss for a cash credit from HMRC.

Loss-making companies: surrender rates

A loss-making company can surrender its qualifying losses for a cash credit. The rate depends on the scheme and accounting period.

The amount that can be surrendered is the lower of: the available trading loss for the period (including any brought forward), and the available qualifying expenditure for that period.

Profit-making companies: a worked example

Company A is a UK production company with an accounting period beginning 1 April 2025. It spends £200,000 making a qualifying production, of which £150,000 is core expenditure, all from the UK. The production earns £400,000 in income, giving a profit of £200,000.

Since all core expenditure is UK-based, the 80% cap applies (80% of £150,000 = £120,000, which is less than £150,000 of UK costs). The company claims an additional deduction of £120,000.

Loss-making companies: a worked example

Company B is a UK production company with an accounting period beginning on 1 April 2025 (therefore, under the new rules for UK expenditure and the new rates for surrendering losses).

It spends £200k making a non-touring orchestral production, of which £150k is UK-based core expenditure. The company receives an income of £100k from the production, delivering a loss of £100k, which is taxed at the main Corporation Tax rate of 25%. The production was completed in a single account period.

Since all the core expenditure is UK expenditure, the production company must cap its costs at 80% (as this is the lower of 80% of costs or the UK expenditure).

Therefore, Company B can claim an additional deduction of £120k (80% of the UK-based core expenditure). This results in the company making a loss of £220k.

The maximum losses that can be surrendered is the lower of:

• Available losses (£220k)
• Qualifying expenditure (£120k)

Therefore, the company can surrender its qualifying expenditure (which is the same amount as the additional deduction) for a cash credit at a rate of 45% (the rate that applies to non-touring orchestral productions from 1 April 2025).

Claiming across multiple accounting periods

Because the calculation is based on cumulative costs, the amount you can claim each year shifts depending on how your costs are spread over the production. Here is an example that shows how this works in practice.

Company C has an accounting period beginning 1 January 2025. The production has £500,000 of total core costs, of which 75% (£375,000) are UK costs and 25% (£125,000) are non-UK costs. The production runs across three accounting periods.

In Period 1, all costs are UK-based, so the 80% cap applies: 80% x £175,000 = £140,000.

By the end of Period 2, cumulative UK costs (£350,000) exceed 80% of cumulative total costs (£320,000), so the cap applies again: 80% x £400,000 = £320,000. Subtracting the £140,000 already claimed gives a Period 2 deduction of £180,000.

By the end of Period 3, cumulative UK costs (£375,000) are below 80% of cumulative total costs (£400,000), so the company can now claim all UK costs. The cumulative entitlement is £375,000, and £320,000 has already been claimed — giving a Period 3 deduction of £55,000.

Across all three periods, the company claims relief on £375,000 — 75% of total core costs, equal to the total UK expenditure.

How are expenditure credits calculated?

The Audio-Visual Expenditure Credit and the Video Games Expenditure Credit are claimed on the cumulative costs of the production (films, TV programmes or video games). This means that businesses are able to claim for the entire production in the completion period or can claim year-on-year.

For every period that you claim for, you must:

1. Calculate total qualifying costs from the start
2. Subtract any previously claimed costs
3. Determine the claim amount for the current period (expenditure credit rate x qualifying costs)
4. Include this figure in your income in your CT600

The credit is considered taxable income (taxed at 25%); therefore, you will receive the net benefit. Once the claim value has been worked out, you can then start to calculate how you’ll receive your benefit.

The credit is initially used to pay off your Corporation Tax liability. Any leftover can then be used to pay off other tax liabilities or surrendered to other group companies. If you still have credit remaining after these steps, you’ll receive a cash credit from HMRC.

Expenditure Credit rates

There are different rates depending on your production:

Need help with your claim?

Creative sector tax relief calculations are straightforward in principle, but the cumulative basis, the switching between European and UK expenditure rules, and the AVEC/VGEC transition all create complexity in practice.

If you're uncertain how the calculation applies to your production, or want to check you're not leaving anything on the table, get in touch with Myriad. Our team has been making creative tax relief claims for over a decade and is happy to review your numbers.