R&D News: EU commission approves UK video games tax relief

Source- Daily Telegraph-27.03.14

The European Commission has approved Britain’s plans to grant tax relief to producers of video games, stating that the plans are in line with EU state aid rules.

George Osborne first announced the Games Tax Relief in the 2012 Autumn Statement after a major lobbying campaign by leading British video gaming figures, who pointed out that jobs and talent were being lost abroad. The tax break was due to come into force on April 1, 2013, and would offer developers up to 25 per cent tax relief on four-fifths of their costs.

However, the EC was concerned that Britain’s plans to stimulate the video games sector were unnecessary and likely to distort the market. It claimed that there was no obvious market failure in this dynamic and growing sector, and games were being produced even without state aid.

Only games that are deemed to be of cultural value will be eligible for video games tax relief. This translates to around 25 per cent of UK produced games. Without this support, the number of new culturally British games would have declined considerably, according to the EC.

The decision will lead to an estimated £188 million in additional investment for the UK’s game developers over the next five years, and generate £172 million in new and protected tax receipts to HM Treasury, according to TIGA, the trade association representing the UK video games industry.

“This is a superb decision by the EU Commission and magnificent news for the UK video games industry. Games Tax Relief will create jobs, boost investment and enable the production of more British video games,” said Dr. Richard Wilson, chief executive of TIGA.

“Tax breaks for games production will help the UK fight its way back to the forefront of video game development. It will also help to further rebalance the UK economy away from an over-reliance on financial services towards a highly skilled, high-tech, R&D intensive and global-export focused industry.”

Rachel Austin, tax director at Deloitte, added that the relief will provide a huge boost to an industry that has faced fierce competition in recent years from developers in countries such as Canada and France, that already offer tax incentives.

“The relief is based on the successful film tax relief, which has provided around £1 billion of support to over 1,000 films since its introduction in 2007, and the television tax relief that was introduced last year,” said Austin.

She added that slightly different cultural tests are proposed for each of three creative sectors but each is based on the test in the current film tax relief. Tests will require a production to score at least 16 points out of a maximum of 30 or 31 across a range of cultural attributes.

“For example, points will be awarded for British locations, British characters, English dialogue, demonstrating British heritage or creativity, production activity taking place in the UK and use of British cast and crew. In some cases, points are awarded for European cultural factors as well as British,” she said.

Deloitte estimates that the relief will be worth £35 million a year.


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