R&D is a differentiating factor in the entertainment and media industry as voice, data, and video converge into new platforms and new product lines. Consumer demand and intense competition for innovative new products, special effects, and alternative delivery channels are encouraging greater investment in R&D.

What is the benefit?
Any development work where your personnel face considerable technical challenges, provided the solution is not readily available to, or deducible by, a competent professional working in the field, has the potential to qualify for the enhanced tax relief. This takes the form of at least a 7.5% absolute cash reduction in taxes, subject to the availability of profits, for eligible revenue costs and will be increasing to a minimum of 8.4% in 2008. Tax rates are also changing but overall this will further increase the value of R&D relief for companies of all sizes.

Furthermore, it is intended that the qualification criteria for SMEs will be doubled making the more generous benefits of up to 24% of the qualifying costs available to many more companies. An immediate deduction is also available for capital R&D expenditure. This gives a significant cash flow benefit when compared to other capital allowances where, at best relief is given over 10 years and at worst not at all. This benefit will be further increased when the rate of capital allowances is reduced in 2008.

For further information, download our publication R&D tax relief opportunities for companies in the Entertainment and Media sector (PDF, 447KB).