TV / Animation / Videogame Tax Relief set at 25%

December 5, 2012

In today’s Autumn Statement, the Chancellor of the Exchequer, George Osborne, has confirmed that the tax credit for the high-end TV, animation and video games industries will be payable at a rate of 25% of UK core expenditure.

This will be further good news for these industries following March’s Budget announcement of the tax credits. Although the industries had been lobbying for a 25% rate during this Summer’s consultation period, the rate of the tax credit has been uncertain until today’s announcement.

Further detail on the proposed design of these measures will be released next week, when the draft legislation and the Government’s response to the consultation are published on 11 December. The legislation itself will be consulted on for 12 weeks until February 2013.

It is to be expected that as with the Film Tax Relief, qualifying UK production companies will be able to choose between (i) an additional deduction for corporation tax purposes at a rate of 100% of “enhanceable expenditure” or (ii) where such additional deduction creates a loss, surrendering such loss in return for the 25% tax credit. Such enhanceable expenditure is capped at 80% of total “core expenditure” (ie pre-production, production and post-production expenditure).

In essence, this means that as with limited budget UK qualifying films, a qualifying UK production company will be able to claim a tax credit equal to 25% of UK core expenditure up to a cap of 80% of total core expenditure. Therefore, for a production where 80% or more of the total core expenditure is incurred in the UK, the payable tax credit will be 20% (25% of 80%) of the total core expenditure.

The tax relief will be payable on qualifying production expenditure as from April 2013, subject to state aid approval. The current expectations are that state aid approval will not delay the commencement date, which is expected to be 1 April 2013.

As a further boost for the UK industry, the Government has agreed to match voluntary industry contributions of up to £6 million over the next 2 years to the Skills Investment Fund administered by Creative Skillset and expand its scope to include skills provision in the television, video games and animation sectors, as well as the film sector.

Today’s announcement means that the Government has made good on its commitment to introduce reliefs that are among the most generous in the world and that will support the longer term sustainability of these creative sectors and represent a direct response to the views expressed by each sector of the need to have competitive reliefs and targeted support for future skills development.