The government sees the creative industries as one of the main drivers of the 21st century UK economy. And in the past month it has put its money firmly where its mouth is, with four key tax changes that will potentially benefit the creative industries on a significant scale.
1. Tax credits for video game, animation and ‘high end’ TV production companies
There is a consultation due on this proposed relief, which needs EU State Aid approval and it is hoped will be introduced in April 2013. The proposal is likely to be to offer a tax credit, in the form of a cash incentive based on a percentage (perhaps 20 to 25%) of relevant expenditure on video game development, animation and TV productions costing at least £1 million per broadcast hour and intended for international distribution.
- Research and development tax reliefs
These have been improved in three ways. Firstly, the enhancement percentage applied to R &D expenditure for tax purposes has risen from 200% to 225%. Secondly, the requirement that cash tax credits for R & D expenditure should be matched by PAYE & NI deductions pad over to HMRC has been dropped. And thirdly, the minimum £10,000 annual spend requirement has also gone. These changes are already in place for the current tax year.
- Patent box
The government is also consulting on the introduction of a 10% tax rate, again effective from April 2013, applicable to income derived from patents by the inventing company. This would apply to patent royalties derived from licensing the patent, and also to the element of the sale price of products attributable to patent rights (expect some interesting negotiation with HMRC on this issue!)
- Seed Enterprise Investment Scheme
Specifically designed for small start-up companies, this offers investors tax relief up to a maximum of 103% (I kid you not!) on investment of up to £100,000 for up to a 30% stake in businesses that have been trading for less than 2 years. This is a relief for which all creative businesses should be eligible, which they can use to raise up to £150,000 of finance from investors. This is already in place for the current tax year.
So not only is the government talking the talk, it is also walking the creative walk. It would be a great shame for creative businesses not to take advantage of this range of attractive tax reliefs.