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The government is introducing reliefs for the animation, high-end television and video games industries from April 2013, as announced in Budget 2012.
A consultation document has been published asking for feedback on the proposed design characteristics of the new tax reliefs .
The plan is to introduce targeted tax reliefs based on the existing film tax relief (FTR) model with the aim making the UK ‘the technology centre of Europe’.
The FTR model operates through a payable cash rebate of up to 20% of UK qualifying film production expenditure which can be claimed for films with ‘core expenditure’ of more than £20m. The payable cash rebate is up to 25% for limited-budget films with core expenditure of £20m or less.
By applying this model, the proposed tax reliefs would give an additional deduction for qualifying core expenditure. This additional deduction, together with the tax deductible animation expenditure, will be deducted from the income arising from the animation. Any resultant loss may be surrendered for a payable tax credit.
The definition of ‘core expenditure’ will be finalised subject to consultation. However, the Government expects that the types of expenditure allowable will be broadly similar to a definition of core expenditure for the FTR, ie, expenditure directly incurred in the production of the relevant film product but excluding, for example, the costs of financing, advertising etc. The qualifying core expenditure is proposed to include all production costs that are integral to the production process itself, including relevant pre- and post-production.
Chancellor George Osborne said: ‘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.’
The closing date for comments on the consultation document is 10 September 2012. The final policy design for the reliefs and draft legislation for consultation will be published in the autumn.
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