The Chancellor has announced plans to give support to the video games, animation and high-end TV production industries in this year’s Budget.
What is being planned?
From April 2013, Corporation Tax relief will be available for companies involved in the video games, animation and high-end television industries.
Details on the precise level of tax relief and how companies can go about claiming it are currently awaited, but it is thought the scheme will be similar to that currently in operation in the UK film industry and which is said by the Treasury to have helped generate over £1 billion of film production investment in the UK last year alone.
How does the film tax relief scheme work?
The scheme is aimed at film production companies for expenses incurred on producing films intended for release in commercial cinemas.
For a film to be eligible for relief, it must be certified as British, either by passing a cultural test or under an agreed co-production treaty, and must incur at least 25% of the total production expenditure in the UK.
Film production companies can claim relief only on production expenditure in the UK, up to a maximum of 80% of the total budget. A higher rate of relief is available for films with total production expenditure of £20m or less.
What will this mean for games, animation and TV?
If the new scheme mirrors film tax relief, video games makers, animation companies and TV production businesses will be able to claim potentially considerable sums in tax relief on the work which they do in the UK.
This will clearly be very welcome news for companies in these sectors, which have particularly strong representation across the North. However, we await further detail on exactly what projects will be covered by the relief, in particular how the Government will define what constitutes ‘high-end’ TV productions.
What has been the reaction to the news?
Video games trade industry body TIGA has lobbied long and hard for this kind of scheme to come to Britain since rivals in countries such as Canada already benefit from tax relief.
TIGA chief executive Richard Wilson called the move “a brilliant decision by the government and terrific news for the UK video games industry”
TIGA predicts that tax relief for the video games sector will generate and safeguard 4,661 direct and indirect jobs, offer £188m in investment expenditure by studios, increase the games development sector’s contribution to UK GDP by £283m and generate £172m for the Treasury.
Lobby group Animation UK said the scheme will “hopefully guarantee the long-term survival” of the animation industry in this country.
However, Intellect, the trade body for the UK’s technology industry, said it felt the Government could have gone further in doing more to optimise the “full potential” of the technology sector.
What does this mean for me?
Whilst this is clearly good news for companies in the video game, animation and TV production sectors, it also offers potential for other creative enterprises. Such tax breaks will enable companies to make much-needed reinvestment.
After initially axing plans inherited from the previous Labour administration for help for video games makers, the Coalition Government apparently now sees the sector and others like it as important for the future growth of the economy.
In his Budget, the Chancellor pointed to the creative industries as one of the UK’s economic success stories and talked about strengthening and reinforcing the sector.
Whether this means that further help will be forthcoming is uncertain, but it holds some potential promise for the future.