The creative industries took a significant hit during the pandemic. With the fundamentals of many disciplines across the sector being live-based such as theatre, opera or live music performances, business as usual was either severely restricted, or brought to a halt entirely.
Coming out of the pandemic, it is important to recognise how important an accountant is to the creative industries. With the financial stability of the creative industries being more tenuous than ever, it is crucial to have an expert to manage your accounts and give comprehensive advice on the financial side of your business.
An accountant who specialises in the creative industries will have an in depth understanding of how your business operates. Many creative businesses will operate on a project-to-project basis and will often require funding from a variety of sources to finance each project. An accountant specialising in the creative industries will not only assist with the standard tax procedures such as tax returns and payroll management, they will also have the expertise to assist you with acquiring valuable finance to maximise the potential of your project, and your business as a whole.
EIS/SEIS– Designed to aid the growth of new companies by making you appear more investible, the Enterprise Investment Scheme/Seed Enterprise Investment Scheme allows tax relief for any investors who are buying shares in your company. The schemes can help ‘raise up to £5 million each year, and a maximum of £12 million in your company’s lifetime’, and can be paramount to a company’s growth. However, there are some complexities in the criteria for this scheme that particularly affects the creative industries. For example, film companies often place emphasis upon individual projects in their application, but this scheme is more tailored towards the general growth of a business rather than a specific project. Nonetheless, the schemes have become more accommodating to the nuances of how creative businesses operate in recent years, but an accountant specialising in the creative industries will be aware of the most up to date specifications and can provide extensive advice on your application. A specialist can guide you with Advanced Assurance, which is a provisional indication from HMRC as to whether the investment into your company is eligible for tax relief under the EIS/SEIS schemes.
An experienced accountant in the creative industries can also assist with attaining creative tax relief, which can be used in conjunction with EIS/SEIS. Tax relief is available for a variety of disciplines within the creative industries such as film, theatre, TV, opera, animation, video games, museums/galleries, and orchestra.
Perhaps the most notable eligibility factor in creative tax relief in many cases is the cultural test. A successful application is dependent on this. To help explain this as an example, the cultural test for film is a points-based system. This is where the extent of your projects representation of, and contribution towards British culture is determined upon. The test comprises four parts which include:
Content- The extent to which your film incorporates British settings, characters, subject matter, and dialogue are all considered under this section of the test
Creativity, Heritage and Diversity- An original piece of work that communicates and interprets British culture in a new and interesting way will be awarded points
The guidelines for the test reinforces the fact that ‘British heritage shapes a common understanding of representation of British people and their contemporary and historical culture.’ Content handled in a project whereby British Heritage plays an active part will earn points
A project which values and encourages Britain’s vast diversity will also put you in good stead for passing the test
Production- If work carried out in the production of your project is predominantly based in the UK, such as filmography, special effects, visual effects and audio then you will be awarded points in this section
Practitioners- If practitioners such as directors or scriptwriters are residents of the UK or any other EEA state then this will contribute to the total amount of points you receive in the test
You can read the official guidelines for this here: bfi-film-cultural-test-guidance.pdf
Other factors contribute to your eligibility for film tax relief, such as a 10% minimum core UK spend requirement, and whether your film is intended for theatrical release. Regardless of which Creative Tax Relief you are applying for, your accountant will be there to help.
An accountant who specialises in the creative industries will also be able to build a dynamic and efficient relationship with the business they are working with as they will have an understanding of all of the technologies and systems that the company use to operate. Systems for managing projects, billing, expense reporting and payment processing will all be familiar to your accountant. This will promote efficiency when your accountant is analysing specific recordings to fulfil their accounting services such as tax returns.
They will recognise the specific financial model of your company, such as the way in which a theatre accounts for ticket sales. A ticket purchase being defined as ‘unearned revenue’ until the show is performed is something they will understand, and how an accrual method of accounting is more appropriate for this model when compiling financial statements.
As Making Tax Digital is becoming a mandatory step in recording your accounting, a creative industries accountant will also be able to recommend the best accounting software to suit your needs. HDH Accountants recommend either Xero, Sage or Quickbooks for this.
We would love to give you more information about our monthly packages
Find out more about: