Budget Win: Tax Break For UK Developers

By John Walker on March 24th, 2010 at 8:57 pm.

And a 4% increase on red briefcases.

British videogame designers have long been campaigning for tax breaks in the UK, similar to those in New Zealand and Canada. In today’s budget, it seems that something has finally been done to help. Alistair Darling has today announced a pledge for a tax credit system that will aid creative industries, including game development.

The trade association representing the British games industry, TIGA, described the move as “an inspired decision”. Pointing out that games provide £1bn to the UK’s Gross Domestic Product, while sustaining 27,000 jobs, they have been arguing for Games Tax Relief for a long time. It seems this move by the government could be the step toward that. TIGA chief executive Dr Richard Wilson (no, not that one) explains,

“Games Tax Relief would operate in a manner similar to UK Film Tax Relief, a measure which has resurrected the British film industry. In order to qualify for Games Tax Relief, a company would have to fall within the scope of UK Corporation Tax. Additionally, video games would need to pass a cultural test, scoring against criteria of European heritage and game locations, languages, innovation, narrative, and location of development and key development staff. Video games that passed the cultural test would then be entitled to benefit from Games Tax Relief. If the game makes a profit, the development company would then be able to use the Games Tax Relief to reduce the amount of tax payable on that profit. If the game makes a loss, the development company would be able to use the Games Tax Relief to obtain a cash tax credit which would reduce that loss. An independent organisation with knowledge and experience of video games production would need to administer the cultural tests, checking submission criteria are met and policing the Relief.”

The aim of this is to increase competitiveness for UK developers, competing against countries like France, Canada and Australia who all provide generous tax breaks and support to their game developers. Without it in the UK the nation has struggled to keep up internationally, and has seen a lot of studios close down. TIGA believes this could make a key difference.

“The effect of Games Tax Relief would be to enhance the competitiveness of the UK video games industry. Our overseas competitors would no longer have a cost advantage against us. Games Tax Relief should lead to increased investment, job creation, innovation, stimulate the development of new genres of games and ameliorate the brain drain of skilled staff to overseas studios. TIGA’s research indicates that over 5 years Games Tax Relief would create or save 3,550 graduate level jobs; increase and safeguard £457 million in new development expenditure and ‘saved’ development expenditure that would be lost without the relief; and generate £415 million in tax receipts for the Treasury, comfortably exceeding the cost of Games Tax Relief. Games Tax Relief would also encourage game developers to adopt new online, more sustainable business models and sell directly to the consumer.”

This is, of course, only a plan at this stage. As the chancellor explains, the scheme will need state aid approval from the European Commission. And presumably for whoever wins the next election to not overturn the decision.

Ta to Alex for the nudge.

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62 Comments »

  1. Vinraith says:

    This is good news for gamers worldwide, well done UK! Let’s hope it goes through smoothly.

  2. Smurfy says:

    I DONT BEEEEELIEVE IT

  3. Jacques says:

    Fantastic news.

  4. jsutcliffe says:

    @Smurfy
    I don’t know if I’m more disappointed that somebody made that obvious joke, or that it wasn’t me who made it.

  5. westyfield says:

    Yay! Although this part worries me: “video games would need to pass a cultural test, scoring against criteria of European heritage and game locations, languages, innovation, narrative, and location of development and key development staff.”
    Who defines how innovative a game is, or how good its narrative? I don’t imagine for a second that the narratives in games I like are at all similar to those that the people (politicians, eurgh) rating the games would like.

    Also, that is one battered briefcase. Couldn’t he have got a new one on expenses or something?

    • Gorgeras says:

      The wording of that worries me: would it exclude games not based in implicitly European settings like Batman: Arkham Asylum and Grand Theft Auto?

      Alarm bells.

    • Michael says:

      Why should games which don’t do anything to promote Britain get tax breaks from the government? It’s not like it’s an industry that employs the otherwise unemployable.

    • mandrill says:

      OT: The unemployable don’t deserve to be employed, and companies should not be bribed into doing so.

      Back on topic: A little warning light went on in the back of my mind at the wording of this as well. We’re going to end up with that bint from the Alan Titchmarsh thing and the Byron woman, and Keith Vaz deciding which games get tax breaks aren’t we? The decisions over which games make the grade and which games don’t are going to be purely political (in other words: dependent on brown envelopes or so bland and uninteresting that no-one buys them).

      Be warned: as soon as the UK gov’t starts giving money to something they’re going to want a say in how its run and what it produces. This does not bode well. I’d rather the UK games industry were successful and competitive without gov’t meddling thankyou.

    • Tom Lillis says:

      @mandrill: As has been… vigorously discussed below, this isn’t a subsidy, it’s a tax break. It’s not so much giving them money as it is not taking money from them.

      But, anyhow, regarding the cultural relevance bit, I don’t think that’s going to matter a hell of a lot. I think this is largely meant to ensure that the tax break isn’t used to develop products primarily intended for non-European audiences, which would significantly undermine the intended collateral economic growth from the trade. It’s also likely designed in such a way that would prevent devs from claiming the tax break on products which are only partially produced in the UK–they’re not going to want to give the benefit to a studio which is technically UK-based but has a bunch of underpaid dudes in Slovakia doing the bulk of the coding. That protects one of the more direct intended benefits of the plan.

      It also gives the government a politically necessary “out” when confronted with providing a tax break to the developers of… I dunno, Turbo Rape Fight VII: The Tentacling. Or, I suppose, GTA, if the Daily Mail needs to whip up some outrage to boost revenues in the future…

      Expect it to be interpreted liberally on the content front, anyhow, is what I’m saying.

  6. CharmingCharlie says:

    Yet another industry that hops on the gravy train that is the poor British Tax Payer. We get screwed with buggy products, late releases, mediocre quality games and pay outrageous prices for games (yes £30 – £40 is outrageous for most games these days). Now apparently we are going to be funding these crooks with the tax I have to pay as well.

    I don’t begrudge paying tax I just wish I could opt out of having to subsidise luxury industries like the film industry and now the damn game industry.

    • Gorgeras says:

      It’s counter-intuitive, but there are examples where lowering the tax burden of certain profitable sectors actually increases the net amount of tax paid by that sector.

      Just because fundamentalist illiberal ‘libertarians’(they only seem to care about liberty when it’s about money) advocate this for virtually every inch of the private sector and it fails because it attracts crooks doesn’t mean it doesn’t work when used in a targeted manner.

    • Nick says:

      It’s a tax break, not a subsidy. There’s a difference.

    • CharmingCharlie says:

      It’s still money out of MY pocket and into THEIRS, the video game industry is a luxury product they make billions in profit and now they are going to get a hand out from the government at my expense.

      Still there is nothing I can do about it, it is interesting though that people are quick to condemn those on benefits as spongers and leaches. Yet when it comes to the government handing out millions to companies everything is all “hunky dory” and perfectly acceptable.

    • Baqueta says:

      Is it so hard to understand?

      Reduced tax burden –> Industry growth –> More jobs & more total tax collected.

      It’s a win-win, although as Gorgeras rightly says it only works in certain situations – i.e. when there is the potential for sustained and stable growth.

    • The Hammer says:

      @CharmingCharlie:

      Why are you supposing the people you are arguing with are “quick to condemn those on benefits as spongers and leaches”? It seems to me you’re dealing with two separate groups of people here. There aren’t any double standards to speak of.

    • pedant says:

      @gorgeras

      as a member of the “fundamentalist illiberal ‘libertarians’” I find it strange to learn that during all that time and effort I’ve spent arguing against censorship, computer game vilification, anti sex-laws and the government using 1984 as a manual I was actually just caring about the economy. Fascinating. Either I am silly or you are confusing libertarians with one of those rare anarcho-capitalists. Instead of engaging in honest debate vs going ad hominem from the start?

      @charming charlie
      A tax break isn’t your money into their pockets? It means they have to pay less taxes. If you want to see money being taken from your pocket and into a business, go visit your nearest farmer?

      But given the risk/hope/chance of government change quite soon, isn’t this budget sort of meaningless anyway?

    • James G says:

      I’m certainly one person who has no problem supporting ‘scroungers’ but also has no trouble supporting this as well.

      Now, I’ll leave the details down to industry folk and outsiders, but I know that in principal moves such as this one can and have resulted in net gains for the treasury. Whether this is well implemented or not is something I couldn’t possibly tell you.

    • Bhazor says:

      “It’s still money out of MY pocket and into THEIRS,”

      That. Isn’t. How. A. Tax. Break. Works.

    • Gorgeras says:

      Pedant, I consider myself a libertarian. I used ‘libertarians’ to describe precisely the kind of ‘only-defending-liberty-when-it-suits-me’ type person that hides behind ‘libertarian’ when defending freedoms and rights and then ‘patriot’ when defending the erosion of them.

    • TeeJay says:

      –sorry wrong place–

    • drewski says:

      Tax breaks are indirect subsidies – you’re essentially allowing one sector of commerce to pay less of a share than they would otherwise pay, all things being equal. As the overall tax required to fund government services has to stay the same, the burden of taxation place on all other sectors (such as private individuals) rises proportionately.

      So whilst no, taxpayers money isn’t going directly into the game developers pockets, by allowing them to pay less tax, you’re increasing the amount of tax required to be taken from all other sectors.

      Having said that, favouring tax breaks for production industries is definitely a positive step – it encourages employment and local investment by producers, all of which benefits an economy. If this kind of break encourages developers to locate in the UK, as opposed to elsewhere, it’s actually possible this kind of tax incentive can increase overall revenues as more profits and employment dollars are taxed in the UK. Given most other mature gaming development markets include this sort of tax break, it’s a bit of a no-brainer for the UK government.

  7. Billy says:

    Great news, but rather worried that if the tories get in it’s going to be scrapped if the Alan Titchmarsh incident is anything to go by (yes I realise the audience of that show is a minority, and the conversatives are typically going to be pro business tax breaks, but the Daily Mail can be awfully persuasive when it comes to issues like this).

  8. Flappybat says:

    A good idea that is instantly squandered by limitations that have no relevance to the mainstream industry. It’s not art, it’s entertainment. Avatar or Modern Warfare 2 generated a huge amount of jobs and GDP but have no cultural significance. Tax breaks are for businesses concerned with profit, not artists creating culture.

    if you want to generate jobs and GDP a tax break is the way to go. If you want to generate culture then grants are more appropriate.

    • DJ Phantoon says:

      When targeted at certain businesses. Otherwise, economics 101 disagrees.

    • littlewilly91 says:

      All depends what you class as culture. Avatar and COD6 were pop culture. I hope the tax breaks aren’t as great for the already massively successful.
      Healthy to fight against monopolies- makes for a fairer business environment where the talent is more freed up to follow it’s dreams, the right games reach the right people, all that wotsit.

  9. Gap Gen says:

    “video games would need to pass a cultural test, scoring against criteria of European heritage and game locations”

    Hey, does that mean developers get tax breaks if they set their game in local heritage settings, such as Manchester Cathedral?

  10. Jamesworkshop says:

    YOU AGAIN!!

  11. Bhazor says:

    It’s good to see those struggling little British studios like Rockstar, Lionhead, Games Workshop, Realtime Worlds and Rare getting some support.

    • Jacques says:

      Games Workshop don’t make video games.

    • Bhazor says:

      But I’m sure they’ll be included with the “creative industries”.

      Anyway my point was that British developers have been ignored for far too long given some of the stuff we pump out (GTA and Arkham for a start), It’s just good to see someone in power actually notice.

  12. Jockie says:

    Don’t mean to be a downer and this is potentially great news, but on a sourer political note the digital economy bill went through Lords today and is expected to be rushed through the commons according to the BBC.

    • Bob says:

      Did anyone really think it wouldn’t? Its not like any of them listen to what people want anyway, the only time you hear from them is when they want voting back in lol

  13. Paul says:

    Woohoo government will steal slightly less! hooray!

  14. ftmch says:

    Shame about the 10% tax hike on cider

  15. DMcCool says:

    Wow. If this goes through this could change my life. Once I’m out of university I’ll be relying on a healthy game scene in this country for work. These breaks could keep companies in the UK and help the growth of new ones.

    I don’t want to get too excited but this sounds like great news..can’t believe I missed it when I read over the budget today.

  16. Samuel Bigos says:

    This makes me happy because I’m planning to become a game dev after leaving uni :).

  17. David A says:

    Chuckles and everything but there are a load of smaller developers in the UK that will really benefit from this. Snark for snark sake isn’t really contributing anything.

    • mandrill says:

      Yes but only if their games are culturally relevant enough (or they can afford the backhanders, in which case they don’t need that tax break)

  18. Monkeybreadman says:

    Fi -to the motherfucking- nally. All the lads (and some girls too) actually inspired by something enough to go to university to study may have a chance of getting a job. BRAVO

    I find this funny this hasn’t been mentioned once on todays news channels, especially as there isnt any changes in the budget, but hey

  19. Uhm says:

    Tea and biscuit simulator.

  20. Mungrul says:

    I’d love to see Jeff Minter benefit from this, and I hope to the gods that he does, but although I know how culturally relevant his works are when considered as contributions to videogaming, I doubt very much that some stuffy old suit in Westminster is going to be able to see it.

    • Flimgoblin says:

      Not sure if I’m remembering wrongly from a speech I saw at the EIF, but games which are made in britain, by brits are most of the way there to be defined as “cultural”. It just means you can’t have (e.g.) Infinity Ward move lock stock and barrel to Kent and get the tax break unless they somehow make their game British in some other way….

  21. Eddy 9000 says:

    OT: I don’t usually get drawn on things like this, but Mandrill, if you don’t think that it’s a good idea for the government to help companies to employ people otherwise overlooked by employers than quite honestly you’re an idiot.

    Are you saying that skilled workers who have been made redundant at an age that would make them unnattractive to employers, those who have had their training and experience cut short by illness or hardship, or women that have suddenly found themselves in need of a job after divorce don’t deserve to work?

    Keep your nasty little right wing comments to yourself next time. X

    • mandrill says:

      Your definition of unemployable obviously differs from mine.

      My definition does not include skilled, qualified or trained people who have found themselves unemployed through their employers holding prejudices against them for age, gender, race or any other factor.

      My definition does include those who have put no effort into getting training, qualifications or skills and yet still believe that they are somehow entitled to a job (and benefits from my pocket). These are people who don’t believe that they have to actually work to earn employment and should just have it handed to them on a plate.

      And tbh, if a company can’t afford to employ the right people to work for them, those with the required skills, etc. then they should shut up shop. That’s market forces at work. If there is no market for whatever they do, then they should probably do something else.

    • DMcCool says:

      “If there is no market for whatever they do, then they should probably do something else.”

      Some people’s worldviews are so different from mine its hard to believe we live in the same world. But hey, thats life.

    • bill says:

      @mandrill:
      The great chain moves slowly, huh?

    • Lilliput King says:

      “These are people who don’t believe that they have to actually work to earn employment and should just have it handed to them on a plate.”

      “yet still believe that they are somehow entitled to a job”

      “benefits from my pocket”

      It’s weird, I feel like I’ve read this all before.

    • Rich says:

      It’s as if the mass of evil contained in the Daily Mail had somehow grown to a point that it coalesces into a kind of basic consciousness. One that can only get larger as it absorbs more bitter venom from its readers.

      What terror have we wrought upon the world?

  22. TwistyMcNoggins says:

    In regards to “culturally British” clause, all it needs is for the guys in charge of the project to be British. Fo example, Slumdog Millionaire (An adaptation of an Indian book, by an Indian guy, staring Indian actors, set in India) was a British film because it was directed by Danny Boyle and funded by British money.

    Arkham and GTA will be fine. Well assuming that all the half decent British talent hasn’t all ready fled for a country that actually has a decent games industry.

  23. TeeJay says:

    An example of some of the films that have managed to pass the “cultural test” (2007 – 2010):

    28 Weeks later
    Harry Potter & the Order of the Phoenix
    Hot Fuzz
    Mr Bean’s Holiday
    In Bruges
    St. Trinians
    Mamma Mia
    The Age of Stupid
    The Golden Compass
    Quantum of Solace
    Rock ‘n’ Rolla
    Slumdog Millionaire
    Clive Barker’s Book of Blood
    Lesbian Vampire Killers
    Hellboy II: The Golden Army
    Morris:A Life with Bells On
    Sex & Drugs & Rock & Roll
    Harry Potter & the Half-Blood Prince
    Alex and her Arse Truck
    A Complete History of my Sexual Failures
    Dogging – A Love Story

    full list (excel spreadsheet) here: http://www.ukfilmcouncil.org.uk/ctproductions

    • TeeJay says:

      Cultural Content
      A1 Film set in the UK = 4 points
      A2 Lead characters British citizens or residents = 4 points
      A3 Film based on British subject matter or underlying material = 4 points
      A4 Original dialogue recorded mainly in English language = 4 points

      Cultural Contribution
      B1 Film represents/reflects a diverse British culture, British heritage or British creativity = 4 points

      Cultural Hubs
      C1 Studio and/or location shooting/ Visual Effects/ Special Effects = 2 points
      C2 Music Recording/Audio Post Production/Picture Post Production = 1 point

      Cultural Practitioners
      D1 Director = 1 point
      D2 Scriptwriter = 1 point
      D3 Producer = 1 point
      D4 Composer = 1 point
      D5 Lead Actors = 1 point
      D6 Majority of Cast = 1 point
      D7 Key Staff (lead cinematographer, lead production designer, lead costume designer, lead editor, lead sound designer, lead visual effects supervisor, lead hair and makeup supervisor) = 1 point
      D8 Majority of Crew = 1 point

      TOTAL ALL SECTIONS (pass mark 16) = 31 points

    • Tom Lillis says:

      So using rough game industry analogues to the above , I could argue that any game by Rock Star North would get fifteen points, getting full marks for items under the second two headings. Not quite there, assuming a similar rubric is used. Buuuuuuut, I would imagine that the sum total of the bottom two headings would automatically get you the four points under cultural contribution for demonstrating “British creativity.” Take a point off for possibly using a more geographically diverse collection of voice actors, and you still pass the test at seventeen or eighteen points. Book it, done. Or am I missing something?

    • Bhazor says:

      Well I hope we’ll see more games set in England. Apart from being the obvious home of Steam-punk et al it’d be great to see some local colour. I’d love to drive a space tank through Grantham for example or kill a prostitute in Hull.

      And in a game!

    • Rich says:

      “Dogging – A Love Story”

      What?!?

  24. Cooper says:

    This is certainly good news. If I’m right, France has had something similar for some time too.

    In an ideal world, I’d like to see a bit of incentive directly aimed at smaller companies. Not necessarily in subsidies, but at least something to encourage investement in the smaller scale.

    Also: About 10 years too late though, really, to be thinking about home grown games development. Bullfrog, Psygnosis, et al. got swallowed up years ago.

  25. Risingson says:

    Why are you so glad? This is COMMUNISM!

  26. Rick says:

    No its not. A communistic move would be for the government to nationalise the industry to control the development of video games, not to give it a tax break to encourage the growth of private business in the country.

    • Rick says:

      Stupid reply system. That was meant to be a reply to Risingson.