Liverpool’s digital and creative sector is growing faster than at any point in the city’s recent history. The £70m redevelopment of the Littlewoods Building on Edge Lane – led by Capital & Centric – has created a 260,000 sq ft creative campus dedicated to film, television, gaming and digital screen production. The Liverpool City Region Combined Authority’s £2bn Investment Fund has identified digital technology as one of four priority growth sectors for the region. The Combined Authority has established a dedicated cluster board for digital and creative industries, and a new 350km full-fibre network, LCR Connect, is making the city region one of the most digitally connected in the UK. The city’s growing reputation as a screen production location – fuelled by its distinctive architecture, varied urban landscapes and competitive production infrastructure – is attracting inward investment and generating a growing ecosystem of studios, post-production houses, VFX (visual effects) businesses and digital agencies.

For games studios, production companies, animation houses, digital agencies and creative technology businesses operating in and around Liverpool, this is a moment of genuine commercial opportunity. However, rapid sector growth brings a compliance landscape that many creative businesses are not fully equipped to navigate. Tax reliefs are changing, employment status rules are tightening, and HMRC’s attention to the creative sector has intensified. The businesses best placed to benefit from Liverpool’s creative boom are those that understand both the opportunities and the obligations.

At UHY Williamson & Croft, we work with digital and creative businesses from our offices in Liverpool and Manchester. Our team has direct experience of the specialist tax and compliance landscape facing the sector – from creative industry expenditure credits and R&D tax relief through to IR35, VAT and business structuring. This article sets out the commercial context, the tax reliefs available to qualifying businesses, and the compliance risks that come with a sector growing as quickly as Liverpool’s digital and creative economy.

Liverpool’s digital and creative sector in 2026: a city finding its creative identity

The scale of recent investment into Liverpool’s creative infrastructure is significant by any measure. The Littlewoods Building at Edge Lane – one of the most iconic industrial buildings in the North West – will be transformed into a state-of-the-art creative campus.

Planning permission for the £70m scheme was granted in October 2024, remediation works are now underway, and the project – which will include two new 20,000 sq ft sound stages alongside studios, workshops and creative workspace – is expected to take the city’s screen production infrastructure to a new level on completion. The scheme is purpose-built for the kind of screen and games production activity that is increasingly drawn to Liverpool – and it is intended to act as an anchor for a broader creative cluster in that part of the city.

The screen production economy

Liverpool’s use as a filming location is well established and growing. The city’s Georgian architecture, Victorian docklands and post-industrial urban grain have made it a recurring choice for major productions – St George’s Hall has doubled as Gotham City in The Batman, the Three Graces stood in for Washington DC in The Crown, and Peaky Blinders has used locations across the city across multiple series. That location economy is now professionalising. The infrastructure around screen production – including camera and equipment hire, locations management, catering, transport and post-production services – is deepening, and the city is building the supply chain capacity needed to support larger and longer productions. Screen production activity generates significant tax relief activity -specifically through the Audio-Visual Expenditure Credit (AVEC), which replaced the previous film and high-end TV tax reliefs from January 2024 – and the businesses capturing that activity are increasingly based in the city rather than commuting it down from London or Manchester.

And it’s not just studios benefiting – private homeowners, particularly those with period properties in Liverpool’s Georgian Quarter or distinctive Victorian terraces, are increasingly being approached by location scouts. Worth a brief mention that any fees received for allowing a film crew to use your home are taxable as property income, added to your other earnings and taxed at your marginal rate, with only the first £1,000 covered by the annual property allowance.

Games and interactive media

The gaming sector as a whole generates around £220m for the Liverpool City Region, with Liverpool having a proud and commercially significant history in video games. The city produced some of the world’s most recognisable gaming franchises, and while the industry’s centre of gravity has shifted in the decades since, a new generation of independent and mid-size games studios is re-establishing the city as a credible games development hub.

Psygnosis – founded in Liverpool in 1984 and later acquired by Sony to become Studio Liverpool – created some of the most recognisable franchises in gaming history, including Lemmings and WipEout. Bizarre Creations, another Liverpool studio, produced the Project Gotham Racing series before its closure in 2011. From that heritage, a new generation of studios has emerged: Firesprite, Lucid Games and d3t are among the active Liverpool-based developers today, with credits spanning titles including The Playroom, Geometry Wars 3 and co-development work on The Witcher 3: Wild Hunt, Hogwarts Legacy and LEGO Star Wars: The Skywalker Saga.”

The Video Games Expenditure Credit (VGEC), which replaced the Video Games Tax Relief from January 2024, provides meaningful cash relief for qualifying studios – and many Liverpool-based developers are not yet claiming the full value available to them.

Digital agencies and creative technology

Beyond production and games, Liverpool’s digital economy encompasses a growing community of digital agencies, UX and product design studios, software developers, data and analytics businesses, and creative technology companies. Many of these operate at the boundary between creative services and technological innovation – a space where R&D tax relief can apply, and where the employment model often creates significant compliance risk. The city’s talent base is strengthening, supported by output from Liverpool John Moores University, the University of Liverpool and Liverpool Hope, and the cluster is developing the critical mass that makes it genuinely self-sustaining.

Operating challenges facing digital and creative businesses in Liverpool

Scaling from freelancer to studio

The most common trajectory for Liverpool’s growing creative businesses is from a founder or small team of freelancers into a structured studio or agency. That transition carries significant hidden compliance risk. A business that operates largely through self-employed contractors when it is small may cross a series of regulatory thresholds – in VAT, in off-payroll working rules, in employer obligations – as it grows, often without fully recognising that the rules have changed. Getting the transition right from the outset is substantially cheaper and less disruptive than correcting it after the fact.

IP ownership and business structuring

Creative businesses generate intellectual property – scripts, code, designs, formats, characters, software – that can be worth substantially more than the business itself. How that IP is owned, and in whose name it sits, has significant tax and commercial consequences. IP held in the wrong entity, or licensed on terms that do not reflect its value, can create unexpected tax charges on a sale or restructuring and reduce the attractiveness of the business to investors or acquirers. Structuring IP ownership correctly from an early stage is something many creative founders overlook until it becomes a problem.

Accessing finance

Creative businesses often struggle to access conventional debt finance because their assets are intangible. A bank lender assessing a games studio or production company sees no plant or equipment to secure against, no physical inventory, and a revenue model that may be project-based rather than recurring. Understanding how to present a creative business’s financial case to lenders, and how creative industry tax reliefs and R&D credits interact with working capital, is a specialist skill. Our colleagues at WC Commercial Finance work alongside the advisory team to support creative businesses accessing the right funding for their stage of growth.

NIC increases and the cost of people

From April 2025, employer National Insurance contributions increased to 15%, with the secondary threshold reduced to £5,000. For studios and agencies whose cost base is primarily payroll, this is a material and ongoing additional burden. A studio with 20 employees on average salaries of £40,000 now pays approximately £14,000 more per year in employer NIC than it did before April 2025. Salary sacrifice pension arrangements and other benefit structures can reduce this exposure – but only if they are set up and administered correctly.

Tax reliefs available to Liverpool’s digital and creative businesses

Creative industry expenditure credits: AVEC and VGEC

The most significant tax relief available to qualifying production companies and games studios is the Audio-Visual Expenditure Credit (AVEC) and the Video Games Expenditure Credit (VGEC), both of which replaced the previous creative industry tax reliefs from January 2024. Under the new regime:

•  Films, high-end TV (HETV) and video games are eligible for a taxable credit at a gross rate of 34%, delivering an effective net benefit of 25.5% of qualifying UK expenditure after corporation tax.

•  Children’s TV programmes and animated productions (both TV and theatrical film) attract a higher gross credit rate of 39%, delivering a net effective benefit of 29.25%.

•  Limited-budget films with total core expenditure of up to £23.5m – which meet additional creative connection requirements – are eligible for the Enhanced AVEC (IFTC) at a gross credit rate of 53%, delivering a net effective benefit of 39.75%. This enhanced rate is available for productions on which principal photography began on or after 1 April 2024.

•  From January 2025, qualifying VFX expenditure within film and HETV productions benefits from an increased credit rate of 39%, and VFX costs are excluded from the 80% cap on qualifying expenditure – a double benefit for post-production and VFX-intensive productions.

To qualify, a production company must be within the UK Corporation Tax net, must be the company responsible for making the creative, technical and financial decisions on the production, and must pass the relevant BFI cultural test. For HETV, the production must have a minimum slot length of 20 minutes per episode and a minimum production cost of £1m per broadcast hour. For video games, qualifying development expenditure must represent at least 10% of total development costs.

The transition timeline is important to understand. Productions that began principal photography before 1 April 2025 may continue under the old tax relief regime until 31 March 2027, after which AVEC and VGEC are mandatory for all claims. Productions commencing after April 2025 must claim under the new expenditure credits. Any Liverpool-based production or games company still operating under the old relief structure should be reviewing its position now – the new regime delivers better outcomes for many businesses but requires proper advice to claim correctly.

The credits are payable – meaning that if a company has insufficient corporation tax liability to absorb the credit, the excess is paid directly by HMRC. For early-stage and loss-making studios, this creates a genuine cash flow benefit that can be material to survival and growth.

R&D tax relief for digital and creative businesses

The merged R&D relief scheme, which consolidated the SME and RDEC regimes from April 2024, provides an additional route to tax relief for digital and creative businesses whose work involves genuine technological innovation. The creative industry expenditure credits and R&D relief are separate schemes – a business can claim both where different activities qualify under each.

In practice, qualifying R&D activity within digital and creative businesses includes:

•  Development of proprietary game engines, rendering pipelines or physics systems where the solution to a genuine technical problem is not derivable from existing knowledge.

•  Development of novel AI tools for content generation, asset creation, motion capture processing or interactive narrative systems.

•  Creation of bespoke VFX or animation software workflows that resolve genuine scientific or technological uncertainty in how digital imagery is produced.

•  Development of real-time interactive technology for immersive media, virtual production stages or extended reality environments, where the technical approach is genuinely experimental.

•  Software development activity within digital agencies where new products or platforms involve resolving technological uncertainty that cannot be inferred from existing practice.

Our R&D Director, Pavel Stupin, leads R&D tax advisory for Williamson & Croft and has significant experience working with technology-adjacent creative businesses to identify and document qualifying activity. A common finding is that businesses either claim too little – because they do not recognise the technological innovation embedded in their core work – or too broadly, in ways that are vulnerable to HMRC challenge. HMRC’s compliance activity around R&D has intensified substantially since 2023: the merged scheme has tightened eligibility conditions, an additional information form is now mandatory for all claims, and pre-notification is required for first-time claimants and those with a gap in previous claims. Poorly documented or over-broad claims are increasingly subject to formal enquiry, and the cost of defending a challenged claim can be substantial. Working with an experienced R&D adviser from the outset is essential.

Capital allowances and equipment investment

Digital and creative businesses investing in qualifying plant and equipment – including specialist production equipment, studio fit-out, server infrastructure, high-specification workstations and editing suites – can access the Annual Investment Allowance (AIA) of up to £1m per year, providing 100% first-year relief on qualifying expenditure. Structuring capital investment to maximise AIA – particularly across related entities or where expenditure straddles accounting periods – is a material planning opportunity that many growing studios and agencies miss.

Salary sacrifice and NIC reduction

Salary sacrifice arrangements, where structured correctly, reduce the employer NIC base by rerouting part of an employee’s remuneration through pension contributions or other qualifying benefits. For studios and agencies with predominantly employed workforces, this is an immediate opportunity to reduce the impact of the April 2025 NIC rate increase. Our payroll team reviews salary sacrifice arrangements as part of standard client onboarding and advises on scheme implementation.

Compliance risks that come with fast growth

IR35 and employment status: the compliance cliff edge

The off-payroll working rules – commonly referred to as IR35 – remain one of the most significant compliance risks facing growing digital and creative businesses. Under the Chapter 10 ITEPA 2003 rules, medium and large companies are responsible for determining the employment status of workers engaged through personal service companies. Where a worker is assessed as ‘inside IR35’ – meaning they would be an employee but for the use of an intermediary – the fee-payer must deduct income tax and National Insurance at source, exactly as for an employee.

From 6 April 2026, the thresholds for the small company exemption increased: a business now qualifies as small – and therefore falls outside Chapter 10 – if it meets at least two of the following: annual turnover not exceeding £15m, balance sheet not exceeding £7.5m, or an average of no more than 50 employees. This is a significant increase from the previous limits of £10.2m and £5.1m respectively, and HMRC estimates that around 14,000 businesses previously classed as medium have now been reclassified as small as a result.

For some growing Liverpool studios and agencies, this may mean that IR35 status determination responsibility has passed back to the contractor’s own company – at least for now. However, this does not eliminate the compliance risk; it relocates it. HMRC’s enforcement activity has not diminished, and businesses approaching the new thresholds face the same cliff edge that existed before, just at a higher level. The creative sector has an unusually high concentration of workers engaged on a self-employed basis: directors, writers, producers, developers, designers and post-production specialists routinely provide services through limited companies. Many of these arrangements have existed informally for years without proper status assessments. Getting IR35 compliance in order – whether responsibility sits with the business or the contractor – is substantially less costly than addressing a HMRC enquiry after the fact

VAT: registration thresholds and supply type

The VAT registration threshold remains at £90,000 of taxable turnover in any rolling 12-month period. For growing creative businesses – particularly those moving from freelance to structured studio arrangements – the threshold can be crossed quickly and unexpectedly. Late registration carries penalties and creates the obligation to account for VAT retrospectively on turnover from the date registration should have occurred. In our experience, VAT registration timing is one of the most commonly overlooked compliance obligations for creative businesses in their growth phase.

Beyond registration, the VAT treatment of creative supplies is not always straightforward. Most creative services are standard rated, but there are nuances: the VAT treatment of productions with overseas co-producers, the treatment of supplies made to non-UK broadcasters or platform operators, and the interaction between AVEC claims and VAT partial exemption where businesses have mixed supplies. Getting these right from the outset avoids the considerably more complex process of correcting them under a HMRC compliance check.

New minimum standards for tax advisers: what it means for creative businesses

From 2026/27, HMRC minimum standards apply to all tax advisers who interact with HMRC on behalf of clients, including requirements around professional conduct and good standing. This matters for creative businesses because the sector has historically been targeted by volume claims firms – particularly in relation to R&D and creative industry tax credits – that submit poorly evidenced claims at scale. The resulting HMRC compliance activity has fallen on the production companies and studios that filed those claims, not on the advisers who prepared them. The new minimum standards are intended to raise the baseline of adviser quality across the market. Working with a firm regulated by the ICAEW – as UHY Williamson & Croft is – provides assurance that your claims are prepared to the standard HMRC expects and are defensible on enquiry.

Looking ahead: what’s coming for Liverpool’s creative sector

The IP licensing opportunity

As Liverpool’s games studios and production companies mature, their IP portfolios are becoming increasingly valuable. Understanding how to structure IP ownership – whether within the trading entity or in a separate holding company – and how to price intercompany licences correctly, is a conversation that needs to happen well before a transaction or fundraise is on the horizon. Poorly structured IP can create unexpected charges on a business sale and complicate negotiations with investors or acquirers. UHY Williamson & Croft’s Transaction Services team, led by Paul Bennett, works alongside our tax advisers to ensure that IP structuring is commercially and fiscally correct ahead of growth events.

Exit planning for creative founder-owners

Many of Liverpool’s most successful digital and creative businesses are owner-managed, and many of those founders have not yet thought seriously about exit. Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) remains available at 10% on the first £1m of qualifying gains – but the qualifying conditions are specific, and the rate has been subject to legislative change more than once in recent years. Employee Ownership Trusts (EOTs), growth share schemes and Enterprise Management Incentive (EMI) options all provide routes to rewarding team members while managing the owner’s tax position on an eventual exit. The earlier these structures are put in place, the more value they can deliver.

What the next Budget may bring

The creative sector is watching the government’s approach to creative industry reliefs closely. The AVEC and VGEC regimes are well established and the VFX enhancement introduced in April 2025 demonstrated continued political commitment to the sector. However, the interaction between creative reliefs, R&D credits and the corporation tax rate means that any future rate changes will have a direct impact on the value of credits claimed. We advise creative clients to model their relief positions across a range of rate scenarios as part of their financial planning.

How UHY Williamson & Croft supports Liverpool’s digital and creative sector

Our team works with digital and creative businesses at every stage of growth – from early-stage studios and production companies through to established agencies and technology businesses preparing for exit or investment. We understand that creative businesses operate differently from professional services or manufacturing firms: they are project-driven, IP-intensive, heavily reliant on freelance talent, and exposed to compliance obligations that most general practitioners rarely encounter.

Our services for digital and creative businesses include:

  • Creative industry expenditure credit (AVEC and VGEC) identification, claim preparation and HMRC enquiry support.
  • R&D tax relief identification, technical scoping, claim preparation and ongoing compliance support.
  • Employment status reviews and IR35 compliance programmes, including Status Determination Statements and process implementation.
  • VAT registration planning, supply chain analysis and partial exemption advice.
  • Business structuring and IP ownership advice, including intercompany licensing arrangements.
  • Salary sacrifice pension scheme advice and employer NIC reduction planning.
  • Management accounts, cash flow forecasting and project-level financial reporting.
  • Exit planning, including EOT structures, EMI and growth share schemes, and Business Asset Disposal Relief qualification advice.
  • Transaction Services support for businesses considering a fundraise, acquisition or sale, through our Transaction Services team led by Paul Bennett.
  • Commercial finance support through WC Commercial Finance for studios and agencies accessing funding against creative reliefs or project pipelines.

Our Liverpool office

Our Liverpool office at 1 Old Hall Street, L3 9HF is at the heart of the city’s commercial district, close to the Knowledge Quarter and the creative infrastructure that is reshaping Liverpool’s economy. Our Manchester office at York House, 20 York Street, M2 3BB gives us further reach across the North West for clients operating in both cities.

To speak to our digital and creative team, contact Damien Loughran or Pavel Stupin on 0151 303 3112 (Liverpool) or 0161 399 0121 (Manchester), or email info@uhy-williamsoncroft.com.

This article is produced by UHY Williamson & Croft for informational purposes only and does not constitute tax, legal or financial advice. Sources are hyperlinked throughout. Information is correct as at July 2026. UHY Williamson & Croft is a member of the UHY international network. Regulated by the ICAEW