Widening of the HMRC R&D tax credit mechanism to encompass creative development

All creative development involves risk. Whether in video game development, a play script, a new rap artist. Yet this is not the sort of risk that banks, VCs or the City are prepared to invest in as it is ‘unproven’, ‘risky’, with uncertain outcomes.

Investment is generally made by the creators themselves, small companies, by trusts and grants. For many it is a hand-to-mouth existence. Even for relatively successful tv or film production companies, the risk they carry as they develop new projects or tv formats pitching them to large rights-grabbing platforms can take them to the brink of closure.

However we already have a system which works exceptionally well to support technology innovation, that could easily be extended to support innovation across the creative sector. HMRC R&D Tax Credits rebate or credit any business up to 33% of the spend on innovation involving the development of unique technology solutions for their business – whether they are successful or not. The Tax Credit system covers research, materials, development, overheads etc that relate to that technological research and innovation.

It has been successfully applied by countless companies to a wide range of projects in all sectors. It is a recognised system with a support infrastructure of accountants funded by retaining a percentage of successful R&D Tax Credit applications.

To extend this system to cover creative idea development for games developers and other screen based industries, to support idea development in our dance houses or theatres, to enable designers to innovate within their consultancies without having to continually rely on a ‘work for hire’ model could drive a tsunami of innovation that positively impact Britain and the world.

We already have the top two creative schools as voted by their global peers in the University of the Art London and the Royal College of Art. By unlocking a wider ability within the creative economy to explore new models, new ideas it allows the creative sector to continue to lead the world post pandemic.

This model would have the additional benefit of helping creators to own and retain more of their Intellectual Property – a driver of growth anbd value within this sector. And would encourage greater investment in idea development from third party investors – particularly if the R&D Tax Credit could be mirrored in their accounts.

The other benefit of this proposal is that by extending a mechanism that is already in place would be relatively easy and cost effective. It is light touch yet would be seen as supporting an enormous sector of the economy who has been badly affected by the pandemic.

 

 

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