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