Innovation reliefs
Positive outlook for research and development claims
The UK is home to a well-established and globally influential media industry. In our survey of 250 business leaders, we explored attitudes towards government support, with a particular focus on UK innovation tax reliefs.
The government-backed innovation tax reliefs (creative tax reliefs, patent box, and research and development reliefs (R&D) offer UK businesses significant opportunities for cash savings. These schemes not only reduce tax liabilities but also help unlock funding to support further innovation.
Following a period of frequent regulatory changes, confidence in these regimes appears to be growing, enabling businesses to submit more robust claims and benefit from the available reliefs.
The media industry is undergoing rapid transformation, driven by evolving consumer behaviours and a continuing shift away from traditional formats toward digital platforms. However, with the drive for digital change, there is a resurgence to keep more traditional forms alive, exemplified by the ongoing ‘vinyl revival’, with UK vinyl sales rising for the 16th consecutive year in 2024. Meanwhile, trends such as streaming, gaming and immersive digital experiences are the dominant forces at play digitalising the media industry, fostering increased innovation and attracting significant investment in new technologies and content delivery models.
With that in mind, does the tax landscape make the UK an attractive place for media businesses to call home?
Labour government supportive of media and creative industries
The government outlined a bold plan in 2024 to boost the UK’s creative industries. Labour’s manifesto outlined a vision for “creating good jobs and accelerating growth” across film, music, gaming and other creative markets, providing the industry with some well-needed support. Central to this vision is the Creative Industries Sector Plan, designed to cultivate the most attractive business environment for investment in creative markets over the coming years. This plan addresses key barriers to growth, such as skills shortages and access to capital, backed by a £60m funding package.
With that said, the Chancellor’s Spending Review on 11 June offered little clarity on the support for the media industry, despite the government’s earlier announcement of a £60m funding package. We expect more detail to come from the government on how its sector plan will support the media sector.
Georgie Bole
Corporate Tax Director
With the merger of the previous two R&D schemes from April 2024, the majority of businesses now fall under the new merged scheme. However, the inclusion of the intensive regime allows start-ups to access a preferential rate, which is higher than the current 15% rate under the merged scheme. We are also seeing increased confidence among businesses making claims, as there is reassurance that the scheme is unlikely to undergo further changes after several years of adjustments. When comparing the UK scheme to those in other European countries, the UK still lags behind in the rates offered overseas.
Given that the UK has one of the largest media industries in the world, the government must carefully consider how to continue encouraging growth in the sector, particularly through tax relief incentives. While reforms such as the introduction of expenditure credits have been implemented across the industry, more could be done to ensure that all subsectors, including gaming, benefit from more favourable tax reliefs.
Creative reliefs take centre stage, again
In the last 12 months, have you submitted a claim for any of the following innovation reliefs?
It’s encouraging to see that 99% of our survey respondents have submitted an innovation relief claim in the past year. Our research also showed that 59% have submitted a creative relief claim, an increase from last year, and 54% submitted an R&D claim, also up on our 2024 findings. However, the question remains whether businesses are missing out on some of the money that could be available to them.
Creative sector reliefs target specific sectors, such as film, TV and video games. These credits often form a critical part of any production budget and have been instrumental in helping to nurture and grow these sectors within the UK. Recent changes to these schemes, including the introduction of the Audio-Visual Expenditure Credit (AVEC) and the introduction of enhanced reliefs for specific areas such as animations, VFX and independent films bring additional complexities. As a result, the actual cash credits available can range anywhere from 20% to 32% of qualifying expenditure, depending on the activities being undertaken. This increased complexity means many businesses are not fully equipped to understand the new rules, the benefits available or how to make successful claims.
The Creative Industry Sector Plan, along with the enhanced reliefs, demonstrates the Treasury’s commitment to ensuring these reliefs continue to operate as intended while specifically boosting sectors where additional support is considered necessary, such as animations, VFX and low-budget films. This sends a strong signal that the UK is serious about supporting these industries and attracting inward investment.
Looking ahead to R&D relief, the landscape is becoming more certain. With the main changes to the scheme now complete and a current consultation underway on advance clearances for R&D tax relief, businesses should gain greater confidence about proceeding with claims and understanding their eligibility.
For media businesses, these incentives are still key to their wider tax strategies and businesses should look to capitalise on the reliefs available to them wherever possible.
R&D claim approvals on the rise?
Our survey reflects this optimism: 56% of respondents strongly agreed that “the UK government supports the media and creative industries”, compared to only 2% who disagreed. Another 34% agreed, while 8% were neutral. This marks a clear improvement from our 2024 survey, conducted before the general election, where most respondents (41%) only “somewhat agreed”.
In last year’s results, a clear theme emerged. A growing proportion of R&D claims were being challenged by HMRC. One-third of respondents reported that their claims had been declined, a figure notably higher than HMRC’s stated rate of 1 in 5 claims being selected for enquiry. Another 33% said their claims were initially approved but then retrospectively challenged by HMRC.
This year, however, the picture appears to be improving. In our latest survey, 40% of respondents reported that their R&D claims were approved. This suggests that HMRC is more comfortable with the quality of claims now being submitted following a period of heightened scrutiny. Nevertheless, this also reinforces the need for businesses to ensure their claims are carefully prepared and well supported. Engaging a reputable adviser is more important than ever to help ensure claims are dependable and can be treated as a reliable source of future funding for development.
Thinking about your R&D claim(s) in the last 12 months, which of the following, if any applies?
R&D: a key area for media investment
Our survey highlighted that 32% of our 250 respondents intended to invest in R&D, the same percentage as our 2024 survey.
Again, we are still seeing a fairly low proportion of businesses looking to make an R&D claim. With many companies now moving from the Small and Medium-sized Enterprise (SME) scheme to the merged scheme, the benefit has decreased. Combined with ongoing cost pressures, some businesses are focusing their resources elsewhere in search of growth and commercial advantage.
Intended to invest in R&D
Will the UK remain a key place for media businesses to set up and thrive?
It appears the dust has settled when it comes to the R&D claims landscape. It is encouraging to see approval rates rising, especially given that recent changes to creative sector tax incentives could have made the UK a less attractive place for media companies.
Our findings from last year still hold true. In a highly competitive global market where many governments actively support creative industries, the UK must maintain a compelling package of reliefs to attract and retain leading media businesses. The introduction of the Creative Industries Sector Plan is a positive step forward. However, rising costs driven by changes to employers’ National Insurance and the National Minimum Wage (NMW) are placing new pressures on business leaders.
As UK costs increase, more businesses are turning to global talent instead of relying solely on the domestic workforce. We also see a growing preference for hiring freelancers on productions, which helps reduce employment tax burdens once projects wrap up.
The clear message from our survey is that UK media leaders are feeling more optimistic, although that confidence dips slightly when thinking longer term.
How optimistic/pessimistic do you feel now about the future of your business?
Constantine Costas
Innovation Reliefs Partner
Our survey shows that confidence in the tax relief regimes—particularly R&D—is beginning to return after several years of decline. This renewed optimism can be attributed to the Labour government's commitment to maintaining the regime in its current form throughout the duration of this Parliament. Policymakers believe that the proposed introduction of a new advanced assurance regime, currently under consultation, could further strengthen this stability.
While this stability is positive for investment, concerns remain. The potential for increased administrative burden and an uncompetitive level of benefit for all but the most R&D-intensive businesses raise significant questions about whether the current regimes will be sufficient to attract new media businesses and supercharge economic growth.