EU Commission "doubts" UK tax relief is necessary

Further delay as EU launches in-depth investigation with four major concerns

The European Commission is to open an in-depth investigation into proposed tax relief for UK games makers, suggesting there "is no obvious market failure" in the sector to warrant state aid.

"The market for developing video games is dynamic and commercially promising," said Joaquin Almunia, Commission VP. "It is not clear whether the taxpayer should be subsidising this activity. Such subsidies could even distort competition."

The move is a blow to UK trade bodies UKIE and TIGA which have both campaigned for tax relief for years. Such an investigation is likely to further delay any introduction of tax breaks, following a delay last month where the EU was unable to approve a required cultural test.

The UK intends to introduce a 25 per cent tax relief on a maximum of 80 per cent of the production budget of qualifying video games. However, based on the information is has available, the EU has said that it doubts whether:

  • Aid is necessary to stimulate the production of such video games.
  • Limiting expenditure for the tax relief to goods or services 'used or consumed' in the UK would not be discriminatory.
  • Offering this type of aid would not fuel a subsidy race between Member States.
  • The proposed cultural test ensures that the aid supports only games with cultural content without leading to undue distortions of competition.

TIGA's CEO Richard Wilson said another delay is a disappointment but once again pledged to support the case for tax relief in the UK, stating: "The EU Commission's decision to launch an investigation into the case for games tax relief is a very disappointing hold-up which if prolonged could jeopardise much needed investment and job creation in the UK's games industry.

"The UK games industry needs to surmount one final hurdle before games tax relief can be enacted: we must make a compelling, convincing and constructive case to the EU Commission of the merits of games tax relief."

"We are extremely disappointed that the European Commission has decided to open an in-depth investigation into production tax credits for the UK games industry," added UKIE's Jo Twist.

"We believe this support is crucial in opening up the opportunity for developers to make culturally British games, but also as a vital incentive for development studios and large multinationals to base their development in the UK and nurture the talent here. We are still confident of having the scheme."

Related stories

Warren Spector: "I couldn't care less about maximising profitability"

OtherSide's resident genius gives his 4 criteria for success at Sweden Game Conference

By Dan Pearson

Imagination Vs. Immersion

Kim Belair on the shift from playing 'with' to playing 'as'

By Kim Belair

Latest comments (14)

Adam Campbell Producer, Hopster3 years ago
Oh dear...
0Sign inorRegisterto rate and reply
On the plus side, this may well be the one time that The Daily Mail will be on our side.
6Sign inorRegisterto rate and reply
Ian Jarvis artist 3 years ago
Why would we want to fuel a race to the bottom situation just like that which the VFX industry currently finds itself in. This is an industry making a lot of money and just like Hollywood it does not need and nor should be given subsidies.
2Sign inorRegisterto rate and reply
Show all comments (14)
Mazeltof Conceptual Imagineer 3 years ago
"Offering this type of aid would not fuel a subsidy race between Member States."

This is the scenario in Canada now. BC has been cannibalized by new higher tax incentives in places like Ontario and Nova Scotia.

They're not wrong.
1Sign inorRegisterto rate and reply
Paul Johnson Managing Director / Lead code monkey, Rubicon Development3 years ago
I'm truly shocked to hear this. No, really.
0Sign inorRegisterto rate and reply
Well, we always knew the EU would find any opportunity to stick the oar in, as long as EU benefits first. The resultant news, was to be expected unfortunately
1Sign inorRegisterto rate and reply
Yiannis Koumoutzelis Founder & Creative Director, Neriad Games3 years ago
Indeed was to be expected. There are some deep politics involved i think. Not the better times between EU and UK.
0Sign inorRegisterto rate and reply
Bruce Everiss Marketing Consultant 3 years ago
The game industry, in an ideal world, should receive zero government aid. The state picking commercial winners has proven to be a policy for failure very many times.
However we are up against the problem of other states (mainly Canada) massively subsidising their gaming industries and thus distorting international competition. If I go to Linkedin and do a search for Codemasters with the country set as Canada it gives a long list of a substantial brain drain. We need to do something to counter this. It would be better for the UK if all that talent were paying their taxes in the country that educated them.

I don't see what the problems of the Commission are. Firstly the British film industry has had almost exactly the same government help for very many years. Secondly the French government has had a very similar scheme in place for a few years now for their game industry.

But this setback is not so great as it could be because firstly we now have very generous R&D tax credits introduced by this government and secondly because the actual rate of corporation tax has come down so sharply.
0Sign inorRegisterto rate and reply
Rob Jessop R&D Programmer, Crytek3 years ago
Minor correction Bruce; R&D Tax Credits were not introduced by the current government. Indeed in 2010 the then shadow chancellor announced that he intended to scrap them to fund a cut in corporation tax.
0Sign inorRegisterto rate and reply
Fran Mulhern , Recruit3D3 years ago
Politics, innit? There's no love lost between the UK and the EU at the minute.

It really is a tough one. Of course it's a race to the bottom - and it's a race that multinationals are exploiting to the full. In Quebec, it's Canadian taxpayer money, used to fund the creation of IP and profits that go abroad and, when the time comes, will no doubt be taken somewhere cheaper. And in the meantime the Quebec government will be squeezed to the full for what it can give - what government wants to be the ones held out to be responsible for the loss of thousands of jobs?

Someone from Canada - I can't remember who now, but I think it was on here a while back - put it perfectly when they said "what was meant to be a helping hand for studios in Quebec has become a permanent part of their business plans".
0Sign inorRegisterto rate and reply
Bruce Everiss Marketing Consultant 3 years ago
0Sign inorRegisterto rate and reply
Looking at the canadian situation, i have a few friends who really enjoy it out there. Although recently its been quite tough in Montreal

Perhaps we can look at Games tax relief, similarly to quantative easing - to help kickstart the local game companies within the short and mid term period.

More significantly, I feel there are some measures to kickstart business without any tax relief

1/ If small game studios are allowed to have a relaxation of hiring/firing - this will do significantly far more because, the constant fear is the litigations/legal element for whatever reason. Especially related to sick pay benefit, maternity pay and replacement of staff

2/ Live PAYE : postphoned for 3 years for firms with < 50 people

3/ Easy access to technological hubs - fully services offices for startups

4/ Reduction of workers rights for part time and flexible working staff
0Sign inorRegisterto rate and reply
Rob Jessop R&D Programmer, Crytek3 years ago
Ah I see. The one mentioned in your report sounds like a new regime applied slightly differently; though I have to stress I'm no expert. I remember contributing to an application for R&D tax credits at a previous company in 2008, hence the confusion. The UK has had R&D tax credits for corporation tax, applied at different rates and with different rules since 2001 for SMEs and large organisations since 2003.
Information from HMRC.
0Sign inorRegisterto rate and reply
Some countries (such as Belgium, where Fishing Cactus is located) do not have ANY incentives for creating games or in general for the Video Games Industry... However we are still there, up and running (it is thought but still). Tax reliefs are only there to maximize profits of greedy corporations but not really to create long term value/employment in the country. For example a good way of doing it would it be to provide subsidies/relief to smaller entities (<50 people) who create new jobs (in the same range as the relief). Would make sense to support the "be indie" trend and provide a variety of content and minds around the table.
1Sign inorRegisterto rate and reply

Sign in to contribute

Need an account? Register now.