UK gives big tax breaks to creative high tech industries

In aiming to establish the UK as the technology centre of Europe, the government hopes that the tax breaks will support technological innovation and ensure that creative industries continue to contribute to economic growth.

The UK’s creative industries are set to benefit from new “world class tax breaks” unveiled by Chancellor of the Exchequer George Osborne in a move designed to encourage innovation and investment.

According to Osborne, the reliefs will be among the most generous in the world, and will build on the success of the UK’s existing Film Tax Relief. The government is now consulting on plans announced in Osborne’s 2012 Budget, which outlined proposals for tax reliefs targeted at animation, high-end television and video games.

Subject to European Union State aid approval, these corporate tax reliefs will enter into force from April, 2013. The government is keen to repeat the boost generated for the film industry, where tax reliefs provided around GBP 95m (USD 150m) of support and helped over GBP 1bn of investment in 208 films in 2009/10.

The consultation invites views from individuals, companies, and representative and professional bodies on the proposed design options. In particular, the government wishes to hear from production companies and those working directly in the production of video games, animation and high-end television.

A separate consultation on the design of suitable cultural tests for each of these reliefs will be launched in the autumn. The tests will identify culturally British works that are to be considered eligible for the new tax reliefs in line with the European Commission’s rules on State aid. In the meantime, discussions will continue with industry-focused working groups and the European Commission.

Osborne explained the government’s initiative: “I want the UK to remain a world leader in the creative industries, that’s why I am announcing tax reliefs that will be among the most generous available anywhere. High-end TV, animation and video games production are exactly the kind of innovative, high-tech industries at which this country excels, and the government is determined to support them as part of our efforts to grow this economy.”

Reacting to the news, Rachel Austin, Deloitte tax director, said: “The aim of the proposed relief to support a sustainable creative industry with a world class skills and talent base in the UK will be welcomed by the industry. However, given the long lead time for productions in these sectors, companies need to know the value of the proposed reliefs as soon as possible to start building it into their planning processes. If the government sets the rate of relief at the right level, the proposals will increase the UK’s competitiveness in these sectors encouraging additional investment in the UK and discouraging UK companies from producing culturally British content in countries that already offer incentives such as Ireland, Hungary and France.”

The consultation remains open until September 10, and the government will publish draft legislation for further consultation in the autumn.