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Osborne to raise R&D tax credits to 200%

Wed 23 Mar 2011 1:07pm GMT / 9:07am EDT / 6:07am PDT
Politics

Update: TIGA estimates 7m benefits in real terms, but disappointed at no games tax relief

Chancellor George Osborne has pledged to increase the R&D tax credit to 200 per cent from April, and then to 225 per cent the following year.

That's up from 175 per cent, and is in line with UK development association TIGA's recommendations proposed earlier this month and backed by Labour MP Stephen Timms.

This means that for every pound that a small and medium enterprise spends of qualifying expenditure it would get two pounds of tax deduction, which it can use to reduce its corporation tax.

Chancellor George Osborne had met with senior industry figures in February to discuss wide-ranging issues including finance, skills, broadband, tax, distribution and copyright - raising hopes for new collaboration and government assistance.

The meeting prompted UK developer body TIGA to once again renew its campaign for tax relief, something it has continued to push for despite previous broken promises.

Osborne also announced that there are plans to improve the intellectual property regime in the digital and creative industries, with more details to follow.

TIGA CEO Richard Wilson welcomed the changes to the R&D tax credit system, telling GamesIndustry.biz that they would lead to around a 65-70 per cent increase in value for games companies, representing approximately 7 million of benefits in real terms.

"We're delighted with the changes," he said directly after the Budget statement was delivered. "It's something we've been campaigning for, for a long time. We've released three reports and had numerous meetings with the Treasury over the past 12 months.

"However, we are disappointed that Games Tax Relief isn't being resurrected," he added, noting that TIGA would continue to lobby for that Relief to be implemented in the future.

UKIE also expressed its disappointment at the lack of industry specific tax breaks, but welcomed the increase in R&D credit, as well as the doubling of University Technical Colleges and the easing of access to finance for small businesses.

A further 2 per cent cut in corporation tax was also applauded, as were the introduction of 40,000 new apprenticeship places and special "enterprise zones" which will offer high-speed internet access and local rate relief.

"UKIE welcomes the government's focus on growth, particularly around supporting small businesses and encouraging external investment in the UK," said UKIE director general Michael Rawlinson.

"Whilst it is disappointing not to have industry specific tax breaks introduced, we were delighted to see increases to the R&D tax credit rate to 200 per cent from April, and then to 225 per cent in 2012.

"UKIE identified changes to the R&D system as a key area in its pre-budget submission to Treasury and shall be concentrating on making sure that the industry makes full use of these tax credits through practical support in the coming months. A further announcement on this will be made shortly.

"UKIE also welcomes the government's acknowledgement of the creative industries in the Growth Review that accompanied this budget. Of particular interest is reference to the Livingstone Hope review of skills in the video games industry, as UKIE is leading on delivery of the recommendations from this report, to ensure that the industry has the skilled workforce it needs to succeed in the future."

14 Comments

Was hoping for the tax relief myself, but I had a feeling it wouldn't be there.

Still, all in all it looked like a decent budget (I sat through the whole thing). As well as the R&D credits, and the general lowering of corporate taxation etc, the enterprise zones could work quite well - I assume it'll be a while before they come online though, especially as the London one hasn't even been decided on in terms of location.

Posted:3 years ago

#1
yeah. It was a reasonably good budget. some crafty decisions.
I guess its unlikely the service sector like ourselvs are in line for any R7D tax credits. :)

Posted:3 years ago

#2

Iain Key
Technical Director

5 0 0.0
No but the companies you outsource to could benefit so you may see a knock on effect that way.
I agree it was a good budget though

Posted:3 years ago

#3

Dean Hulton

5 0 0.0
I've been quickly looking through the innovation.gov web page on R&D tax credits

the definition of R&D is "work to resolve scientific or technological uncertainty aimed at achieving an advance in science or technology" what areas of game development would that cover?

Posted:3 years ago

#4
@ Dean - I think it's more widespread than it sounds, but I'm obviously not a developer so I'm unsure. Might be worth asking TIGA.

Posted:3 years ago

#5
I second this query. What are R&D Tax credits and who and how do they apply???

Posted:3 years ago

#6

Ross McCafferty
Studying Computer Animation

3 0 0.0
I'm not sure 100% how it works but TIGA CEO Richard Wilson was also quoted in the Independant saying "This will enable studios to invest more in R&D, generate and retain new IP, and hire more development staff. Reforming the R&D tax credits along the lines proposed by TIGA will help power our high technology industry forwards."

Crucially, he believes it will result in hiring more development staff. :)

Posted:3 years ago

#7

James Boulton
Tools & Tech Coder

133 171 1.3
R&D tax credits can be claimed for quite a lot of work if the risk of overcoming technical problems is the onus of your company. Ie. you are being paid for a given time to complete a project and have to overcome technical problems to do so within the time (this is my crude understanding anyway). Also particularly good if you develop your own engine technology.

Well worth using a company who specialise in this area, and there are quite a few. We've used Braithwaite Tax Recovery Consultants and they've been extremely helpful (and have experience in the games industry).

Posted:3 years ago

#8

Michael O'callaghan
Studying MA Computer Games Art (Character)

6 0 0.0
I've been looking for work for 8 months since I finished my M.A. Repeatedly being told by agents and companies that I have a very promising portfolio and would make a great entry level candidate but that there simply isn't any openings for people without experience. If this does anything to help motivate studios to hire more graduates then it's great news for me.
Fingers crossed :)

http://www.mikeocallaghan.daportfolio.com/

Posted:3 years ago

#9

Iain Key
Technical Director

5 0 0.0
It's all a bit vague and hand wavey but... basically if a company can claw back costs of employees working on R&D projects that contribute towards general technological advancement (not just the company's own knowledge).
The full definition is found here http://www.hmrc.gov.uk/manuals/cirdmanua... and it's all very complicated I warn you ;-)

In real terms if you have someone working on say, a new game engine or (I think) even if they're trying to improve an existing technology (shaders, game engines, and so on) then a company can now try and claim back 200% of the cost of the employee (i.e. salary) or equipment (i.e. pc or other hardware) against their corporation tax at the end of the year.

It is all very vague though and I am not an accountant, lawyer, civil servant, ymmv, etc, etc so please nobody take my word on this without getting proper advice ;-)

Posted:3 years ago

#10
The other important bit is that it used to be limited to work you were doing in relation to your own IP - which didn't really help work for hire studios. I think that element of the test - that you're working on your own IP - has been removed now, so the remit is wider in terms of who can claim.

Posted:3 years ago

#11
It all looks a bit hand wavey.

For example, we work in the art creative segment of the games industry.

Does time spent in art education, improvement in digital art techniques within the 2D to 3D pipeline factor into the R&D segment. Certainly alot of Handwavium involved :)

Posted:3 years ago

#12

Ailsa Bates
Producer

1 0 0.0
I've had R&D tax credits for development before and it is not easy to get - you only qualify if the work is "groundbreaking" so it needs to be solving a new technical problem, you can't reinvent the wheel and get the credits.... Plus for somehting like six years after you get them the tax man can audit the company and claw it all back if your work is deemed to be not innovative enough (which would kill most development companies). It's not the same as a tax break, especially since most games are solving the same or very similar "difficulties" i.e. a new engine unless it solves things in a very different way wouldn't qualify. Plus you only get some money back on your tax contribution on salaries for the employees doing this work, nothing else. And no, Dr Chee, I don't think your work would qualify from my experience being audited! They told us if we were using an exisiting coding language (i.e. c++) that we couldn't be doing anything innovative or unique although we did manage to persuade them otherwise!

Edited 3 times. Last edit by Ailsa Bates on 24th March 2011 1:15pm

Posted:3 years ago

#13
so basically, its a rubbish tech credit unless you're building a new engine.
lol :)

Ok, time to gang up for Game economic cluster/hub and improvement of games education, networking, and inter departmental sharing of techniques/staff/skills

Posted:3 years ago

#14

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