UK devs concerned over Cultural Test for tax breaks
"95 per cent of games currently on the market are not set in the real world, or any world for that matter"
British developers are increasingly concerned that the "Cultural Test" accompanying the incoming tax credits will exclude the vast majority of games made in the country.
The legislation governing the proposed tax breaks was a part of this year's Finance Act. One aspect of qualifying for relief is a test designed to assess each project's contribution to the local and national culture. This includes the use of a British workforce and the location where the work takes place, but it also applies to the content of the game, and that's where the problem arises.
"I would estimate that 95 per cent of games currently on the market are not set in the real world, or any world for that matter," said Iain Gilfeather, co-founder of Fat Pebble Handmade Games.
"So it would be almost impossible for any companies in the UK games industry to meet the criteria required by the proposed 'Cultural Test'. Let's hope it is given a re-think before it is finally approved."
A "Cultural Test" is standard practice when applying tax credits to creative industries. In this instance, a game will have to accrue 16 points from a total of 31 different criteria relating to the project's 'Britishness', but UK developers believe that film and television projects will have an inherent advantage.
"The difficulty lies with the EU state aid provisions," said Stuart Noakes, head of tax at the accountancy firm Carpenter Box. "Member States are prohibited from providing state aid if that aid will affect trading conditions to an extent that it is not in common interest of all member states.
"State aid can be used to promote the culture and heritage of a member state, which is why the cultural tests are an essential part of the new legislation, provided the outcome is not contrary to the common interest."
The tax breaks are still awaiting approval from the EU Commission, and the last word on the matter was less than encouraging. In April, Joaquin Almunia, vice president of the Commission, indicated that the UK industry was too "dynamic and commercially promising" to be in obvious need of taxpayer's money. The results of the EU's "in-depth" investigation into the matter are still unknown.
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