TIGA has released a new report calling on the government to improve the R&D tax credits system to offer videogames companies greater benefits - a move that has received backing from MP Stephen Timms.
The key items proposed in the report, launched ahead of the Budget later this month, include:
Scope: The scope of R&D tax credits credit should be expanded to include other associated costs incurred in the development of a new game: premises costs, the costs of applying for IP protection and design costs.
Rate of relief: The rate of relief under the SME R&D tax credit scheme should be increased from 175% of qualifying expenditure to at least 200%. This would mean that for every pound that an SME spends of qualifying expenditure it would get two pounds of tax deduction which it would use to reduce its corporation tax.
Assistance for loss making companies: SME R&D tax relief should be reformed to help loss making companies. At present, loss making businesses receive 24p for every £1 spent on qualifying expenditure. This should be increased to 28p for every £1 spent, so that loss making, R&D intensive firms also share in our proposed rate of relief.
Process: The claims process should be simplified. Developers should have a named contact within their HMRC R&D Unit to approach with questions about the eligibility of their costs and activities. Further, it would be helpful if the Government could speed up the delivery of the R&D tax relief, which is of course a retrospective form of assistance, and commit to a deadline for approval and settlement of each claim.
With the implementation of these recommendations, TIGA believes around 65-70 per cent greater value would be generated for games businesses, enabling them to invest in more research and development, work on new IP more effectively and hire additional development talent - ideas which have found support inside Parliament.
"The last Government was right to commit to supporting the high tech, highly skilled UK videogames industry, and the current Government should do so in the coming Budget," said Timms, member of the All-Party Parliamentary Group for the Computer and Video Games Industry. "They should also seriously consider TIGA's ideas for reforming R&D tax credits to benefit this billion pound, world leading industry."
Labour MP Timms, now in opposition, was the financial secretary to the Treasury when the previous government included a provision to introduce tax relief to games business in the UK along similar lines to those still enjoyed by the film industry.
"This report highlights how the R&D tax credits system can be reformed to power a high technology recovery," commented TIGA CEO Richard Wilson. "The UK videogames industry is a high tech, highly skilled and export oriented industry that needs the right support from Government to continue to flourish.
"The R&D tax credits system should be reformed to promote additional investment in R&D particularly in small and medium sized enterprises. We call on the Government to support the UK video games industry by introducing TIGA's proposals to improve the R&D tax credits in the forthcoming Budget."