As part of his budget speech last night, George Osborne unveiled a film industry-style tax break that will help to encourage creative development in the animation and games industries.

Aardman Animations was highlighted as an example of British excellence – and Osborne said that the Government intends to keep ‘Wallace and Gromit’ exactly where they are. 

Aardman’s head of broadcast and development Miles Bullough has previously said that the firm could be forced to leave the UK to cut costs.

He told The Guardian that the tax credit would be “transformational” for an industry that pulls in £300m a year and directly hires almost 5,000 people.

We have seen a dramatic decline on UK television of home-produced animation and we now have a shot a reversing that trend. The credit will create thousands of UK jobs and our research shows that there will be a long-term financial gain for the UK.”

The video games industry also contributes heavily to the economy, with 9,000 people in the UK working from 300 studios. But the cost of development means that many have chosen to relocate to places like Montreal in Canada, where tax incentives help to reduce these substantially.

Tax partner at PricewaterhouseCooper 
Barry Murphy told us that for many years the games industry has asked to be recognised for the value it drives.

It looks like it’s now game on with the Chancellor announcing tax breaks will extend to games, and some TV productions come back into the taxrelief net too. This is good news for the British industry as it was under increasing competitive pressure from other countries offering lucrative credits.”

Games industry trade body UKIE (UK Interactive Entertainment) said that a games tax relief would create an estimated 4,700 direct and indirect jobs, and generate £188m in investment by studios. The Department of Culture, Media and Sport said the break would create and protect 1,650 studio jobs and contribute £280m to GDP.

International tax partner at Deloitte Zubin Patel speculated on how these new tax relief schemes – which are due to be rolled out in April 2013 – will work.

For the film tax credit regime, at least 25% of total production cost must be incurred in the UK, and we expect that the proposed relief will carry similar or stricter conditions.It is also likely to apply to productions that commence after a future date to ensure the relief is effective in influencing future behaviour rather than subsidise productions that are already underway.”

He added that there has been a history of exploitation of such reliefs, and it is likely that the Government will try to protect the new schemes with anti-avoidance legislation to ensure that it truly benefits the businesses it was created to help.