U.K. Ad Industry Fights Exclusion From Tax Break

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U.K. agencies are fighting back against the government's refusal to allow tax breaks for the advertising industry, when its fellow creative industries -- film, TV and video games -- are set to benefit from new taxation rules being drawn up by the Treasury.

The Institute of Practitioners in Advertising, the U.K.'s agency association, has launched a campaign to persuade the government to rethink its stance. Geoff Russell, director for media affairs at the IPA, accused the government of being "illogical and snobbish about the role of advertising. The fact they are specifically excluding us has stuck in our throats."

Mr. Russell added, "To say that advertising is excluded because it's commercial is illogical: 'Downton Abbey,' 'Wallace & Gromit,' video games -- all are equally commercial. We are appealing to the Treasury to change its mind. We need help as much as they do."

A government consultation on Creative Sector Tax Relief is currently underway, and the Treasury has declared that it is looking into extending tax breaks that already apply to the film industry to cover other "output oriented" creative industries, such as animation, high-end television and video games. The existing tax break offers a cash rebate of 20% or 25%--depending on the film's budget--of qualifying production expenses, according to the British Film Industry's website.

But the consultation specifically excludes advertising because it is a commercial business. An IPA statement argues that advertising tends to be at the forefront of the sort of creative technological developments which this tax relief is aimed at, and which keeps the U.K. industry competitive.

Advertising uses the same production companies that also specialize in high-end television and animation. "Without a flourishing ad industry," the IPA statement said, "high-end creative productions would not be able to draw on such a pool of highly-skilled film crew, lighting companies, post-production houses and animators and would be forced to go overseas."

There is already a flow of U.K. business to production companies in Cape Town, Prague, Budapest and even Buenos Aires, where creative expertise is catching up - and rates are cheaper.

Mr. Russell said, "It's plain bad thinking. The U.K. ad industry provides the day-to-day bread and butter for the pool of experts that is then drawn on to produce high-end films and television."

Alex Hunter, finance director at the IPA, said in the statement, "If the true intent of this tax relief is to promote and encourage the U.K.'s technological innovation in the face of overseas competition, then the use of the output should be secondary to the nature of the production work. By specifically denying tax relief on advertising work, it is encouraging production houses to switch their efforts away from a creative industry which is key to the U.K. economy."

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