The long and winding road
TIGA's Games Tax Relief campaign has been a long, arduous, seven year campaign, which has had to overcome delays, indifference and opposition from certain global publishers, changes in government policy, and a EU Commission investigation before finally achieving today's resounding victory for the UK's games industry.
TIGA initially secured the policy in the previous Labour Government's final Budget in March 2010, only for it to be dropped in the June 2010 Budget by the Coalition Government. Undaunted, TIGA resumed its campaign for GTR, and after another 18 months of relentless work, convinced the UK Government to back the measure in the Coalition's March 2012 Budget.
However, GTR was then blocked by the EU Commission as it announced a formal investigation into the proposal in April 2013, citing concerns including video games not being culturally equal to film, and thus not deserving of the same or similar tax breaks, in addition to the potential for the programme to distort the EU's internal market.
TIGA then submitted extensive and compelling evidence to the Commission, co-ordinating its efforts with the UK Government and its partners in the European Games Developers' Federation (EDGF) to successfully assuage all of the EU Commission's concerns. This culminated in today's announcement in the Budget that Games Tax Relief has at long last been officially approved and can now be set into motion. The campaign for Games Tax Relief has been a seven year journey up a long and winding road. We've finally reached the summit.
A significant achievement
This is no mean achievement. Firstly, game developers in many countries receive tax breaks for games production. No such tax breaks currently exist in the UK and so the industry has declined. Between 2008 and 2011, employment in the sector fell by over 10 per cent and investment by £48 million. GTR will power growth in our industry. Secondly, TIGA won GTR despite the Coalition Government's strategy of economic austerity, which is manifested in a restrictive fiscal policy. Thirdly, TIGA, working with MPs and MSPs of all political parties, convinced the Coalition Government to change course. Fourthly, working with the UK Government and the EDGF, we have addressed the EU Commission's initial concerns and opposition to GTR.
Games Tax Relief's key features
TIGA has lobbied for an effective Games Tax Relief which includes the following key features:
- video game development companies (not LLPs or partnerships) that design, produce and test a video game and which are registered in the UK will be able to claim to claim GTR.
- there is no minimum spend threshold, so small game projects can benefit;
- tax relief is available on both pre-production and post-release development costs (e.g. any spend on designing, developing and producing a video game), but not expenditure on debugging or maintenance on a 'completed' game;
- there is a flexible cultural test which games have to pass in order to benefit from GTR, e.g. points will be awarded in the test if the game uses the English language and if it is set in the UK/a fictional setting;
- UK video game businesses will be able to claim back up to 25% of qualifying expenditure, of 80% of the total qualifying costs of game production;
- following a successful claim for GTR, HMRC will pay back the amount in the form of a tax credit, which can be used to reduce a business's corporation tax liability; and/or
- alternatively, if the game qualifies for Games Tax Relief, passes the cultural test but makes a loss then the company will be able to claim a credit back from HMRC.
What does GTR mean in practice?
GTR is good for games studios, it is good for the games industry and it is good for the wider UK economy. GTR is good for games studios because it effectively reduces development costs on qualifying video games. This means that more UK games studios will be able to compete on a more level playing field with our overseas rivals. GTR will also effectively improve access to finance for many games development studios. This in turn will enable more studios to innovate and to develop their own IP. Games Tax Relief will also enable studios to make culturally British video games. This is for two reasons. Firstly, Games Tax Relief should enable more studios to self-publish and keep a British feel in their games. Secondly, Games Tax Relief will reduce the cost of games development in the UK and so could incentivise global publishers to take more of a risk on developing games with a British character.
GTR is good for the games industry because it will result in an increase in jobs, projects and investment. TIGA's research indicates that GTR will create and/or protect 4,661 direct and indirect jobs; encourage approximately £188 million additional investment expenditure by UK studios; generate £172 million in new and protected tax receipts to HM Treasury, and all at a cost of just £96 million over five years. To give just one example, Eden Films plans to build a new games studio, Codec Studios, and to develop a new £30 million video game. Based in central London, Codec will employ over 100 highly skilled development staff for a minimum of three years. This investment and others like it will take place thanks to the introduction of Games Tax Relief. GTR is good for the UK economy. It will help to play a part in rebalancing 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.
Games development companies can find out more about Games Tax Relief by contacting TIGA at firstname.lastname@example.org TIGA can recommend several excellent accountancy firms with a good knowledge of video games and an expertise in claiming tax relief. TIGA will be publishing a briefing document, a guide on Games Tax Relief and holding seminars on how to claim GTR. Please keep an eye on the TIGA website.
The EU Commission is to be congratulated for giving Games Tax Relief the green light. The UK Coalition Government, The All Party Computer and Video Games Industry Group in the Westminster Parliament, the Cross Party Group on Video Games Technology in Holyrood, the Labour Party, the Scottish National Party and the EDGF also all deserve full recognition for their ongoing support for this critical measure.
TIGA, by fighting for and winning Games Tax Relief, has ensured that developers and digital publishers will in future compete on a more level international playing field, improved access to finance and given a stimulus to investment and job creation in the games industry. It is a great day for players, developers, and the United Kingdom.