Tax relief to be introduced for some British media productions

"Not only will this help stop premium British TV programmes like Birdsong being made abroad, it will also attract top international investors like Disney and HBO to make more of their premium shows in the UK. It will support our brilliant video games and animation industries too", said the Chancellor in his Budget speech.

The Government will consult on the design of the scheme over the summer with a view to introducing legislation in next year's Finance Bill. It is envisaged that the relief will be available from April 2013.

The measure is described in the budget report as "part of a new ambition to make the UK the technology hub of Europe".

"This is a timely recognition of the importance of the vibrant, world class games development sector we have in the UK to future growth and prosperity," said Andrew Hornigold, a technology sector expert at Pinsent Masons, the law firm behind Out-Law.com.

"Businesses in this sector are precisely the sort of creative, high end generators of wealth and jobs that successive Governments have said they want to support so it is encouraging to see positive progress in that regard," he said.

The scheme is expected to be similar to film tax relief. Under this scheme, for a film with total core expenditure of £20 million or less, a film production company can claim an additional corporation tax deduction or payable cash rebate in the case of loss making companies of 25% of UK qualifying film production expenditure. The deduction reduces to 20% where the expenditure exceeds £20 million.

Under film tax relief a culturally British film needs to be certified as such by the Secretary of State for Culture, Media and Sport on the advice of the British Film Institute. 

The Chancellor estimated that film tax relief "helped generate over £1 billion of film production investment in the UK last year alone".

"Tax relief for the video games sector will increase employment, innovation and investment in the UK video games industry," said Dr Richard Wilson CEO of TIGA, the trade association representing the UK Games Industry. "Our research shows that Games Tax Relief should generate and safeguard 4,661 direct and indirect jobs; £188 million in investment expenditure by studios; increase the games development sector’s contribution to UK GDP by £283 million; generate £172 million in new and protected tax receipts to HM Treasury, and could cost just £96 million over five years."

Planned tax breaks for video games were first unveiled by former Chancellor Alistair Darling in the Labour Government's last budget in March 2010. However in his emergency budget in June 2010 George Osborne described the proposals as "poorly targeted" and announced that they were being scrapped.

The video games industry has been lobbying over the last four years for tax relief to be introduced for the games industry

The introduction of the scheme will be subject to EU State Aid approval.