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Osborne cancels UK videogame tax relief

Labour's promised industry assistance annulled in Tory/Lib Dem budget speech, as VAT rises to 20%

Chancellor of the Exchequer George Osborne has just confirmed fears that the formerly-promised tax relief for the UK games industry will no longer go ahead.

During his budget speech at Westminster today, his only coverage of the issue was to say "planned tax relief for the videogames industry will be cancelled," referring to the original plans for the aid as "poorly targeted."

The budget document itself states that, as a result of the axing, the government expects to save 40 million in 2011-2012, and 50 million in the years following.

This follows recent rumour that the Labour-made promise was unlikely to be realised in the light of the country's wider economic woes, though some optimism had remained.

Prior to the election, the Conservatives had been broadly in favour of the cut, hoping to bolster the UK game development sector in a similar way to the help offered to the film industry.

Other major points of the budget announced so far included a two-year pay freeze for public sector workers earning more than 21,000, limits on housing and child benefit, a cut to 20 per cent in corporation tax for small companies and, most controversially, a rise in VAT to 20 per cent from January.

"The years of debt and spending made this unavoidable," said Osborne, to a chorus of boos.

The corporation tax cut, together with improved support for companies outside of the capital, may provide some assistance to smaller developers and start-ups, however.

Anyone who sets up a new business outside London, the south-east and east of England will be exempt from 5000 of National Insurance contributions for each of first 10 employees they hire, the chancellor promised.

For larger companies, corporation tax will be cut by 1 per cent per year for four years from next year, bringing it down to 24 per cent, while employers' National Insurance threshold is to rise.

Ed Vaizey, the coalition government's minister for culture, will discuss the issue of videogame tax relief at the Develop conference in Brighton next month. The Conservative front-bencher is due to speak during the morning of Wednesday July 14.

Leading UK videogame trade organisations, including ELSPA, TIGA and Deloitte, have condemned the cut and pledged to continue lobbying for UK games development aid.

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Latest comments (27)

Indeed.

Nevertheless, we should continue the existing momentum and relobby for this tax relief to remain competitive, progressive and allow for a large growth in UK creativity and world leading entertainment/games content.
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Chris Hayward6 years ago
No surprise there then...
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Dan Griliopoulos Journalism 6 years ago
There was some support for businesses outside of London, which thankfully includes most studios, and that corporation tax cut for smaller businesses should help too. Sadly, he indicated that many of the last-minute Labour commitments were completely unfunded - they really were last-minute election gimmicks on that reading, and it sounds like the videogame tax relief was one of those.

Edited 1 times. Last edit by Dan Griliopoulos on 22nd June 2010 1:34pm

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Show all comments (27)
I'd advocate patience. We were never gonna win the battles overnight.

This parliament session understandably is not the right time. Let Osborne do his axe cutting and maybe in 6-8 months time is a good push for such a move. Who knows what the general economic weather and consensus will be thence.
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Andreas Varotsis6 years ago
Oh well - looks like we'll have to trust Canada to make games for now. It's hardly the end of the world.
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Kingman Cheng Illustrator and Animator 6 years ago
Hah surprise?
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Bryan Robertson6 years ago
What was that about the Tories being the best bet for the games industry again?
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Ben Furneaux Designer, Turbulenz Limited6 years ago
Lobbying needs to continue. Eventually this will happen, it's just a real punch in the face that we have to wait, again. It's about time our industry was taken seriously.

What annoys me most about this is the complete about turn. In the run up to the election they stood by the tax breaks.

Edited 1 times. Last edit by Ben Furneaux on 22nd June 2010 2:14pm

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Russell Watson Senior Designer, Born Ready Games6 years ago
Is anyone honestly suprised?

Edited 1 times. Last edit by Russell Watson on 22nd June 2010 2:16pm

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Fran Mulhern , Recruit3D6 years ago
What Russell said.

This was always going to happen. As a nation we're broke, and there was always going to be a difficulty for the government in selling the tax breaks to the general public.

At least they're cutting corporation tax, changing the NI and R&D situation. It's not a lot of help, but it IS some help. And increasing the tax free personal allowance also helps.

Like some others have said, maybe in a few months when things are better.

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robert troughton Managing Director, Coconut Lizard6 years ago
Having the 5000 NI reduction (per employee) will benefit small startups better anyway - the tax breaks that were being mooted would only have benefited the larger studios.

If tax breaks will ever become a reality, TIGA needs to become more independent than it really is. Right now, the board is mostly made up of CEOs of large british dev studios - and the policies that they were putting forward were all to the benefit of the company, not the individual. Good companies, of course, would pump that money back towards their employees (to try to stop them heading to Canada) but I suspect that, unfortunately, the majority wouldn't................
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Personally, I'd in vest it in training, improving the quality and overall working experience/value of employees as a incentive + stock/options.

Naturally, for some folk money is their arbiter/measure of success. In that instance, its unavoidable of losing employees in that instance (which you would not want in any regards - i.e a wage incentive should not be a incentive to prevent brain drain)
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Aidan Fitzpatrick Artist 6 years ago
disappointing, but unsurprising.
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Thomas Smith Technical Artist, Massive Entertainment6 years ago
disappointing
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Leon Green Political lobbyist & Gamers Voice Director 6 years ago
Disappointing...
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It has been clear to me that this was going to happen since the speculation of the VAT increase came out last week.

Unfortunatly this is the times we live in, just be thankful we do not pay as much VAT as Sweden :)
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Alfonso Sexto Lead Tester, Ubisoft Germany6 years ago
Seems we all saw that coming...
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Kingman Cheng Illustrator and Animator 6 years ago
Somehow I don't mind this tax relief thing not coming into affect soon, I appreciate it's a rocky boat at the moment around here, but I think it's cheeky that they categorically promised this when they come into power and didn't deliver. I was very surprised they supported the games industry in such a way earlier this year, I'm sure many thought this was just to try and win some votes and quite clearly it was.
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Russell Watson Senior Designer, Born Ready Games6 years ago
"I appreciate it's a rocky boat at the moment around here, but I think it's cheeky that they categorically promised this when they come into power and didn't deliver."

To be honest, everyone should of seen this coming. All of the parties said they were committed but stopped short of actually providing details. The fact that the tories hadn't included it in their manifesto and claimed it would be in the 'last minute mini manifesto' which still failed to appear was a dead give away.

As I commented before the election on gi.biz, it was nothing more than a nudge and a wink to garner votes for doing nothing. It's practically default election behaviour but everyone fell for it still. If it was any other area of politics, like the NHS, they would of been called out for it immediately. I also doubt the u-turn is to do with the state of the country's finances, more to do with how serious the current crop of politicians view the industry. Considering there are only two MPs who concern themselves with the industry (one more so than the other) and the disgraceful turn out in the commons for the Digital Ecomony Bill. The industry was paid lip service.

Edited 1 times. Last edit by Russell Watson on 23rd June 2010 12:31pm

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Kingman Cheng Illustrator and Animator 6 years ago
"All of the parties said they were committed but stopped short of actually providing details."

Exactly, and on the politcal side of things, Labour are just now going we told you so! Even though they would have had to play the devils themselves.

The Tory's are being smug, and the Lib Dems just sit back quietly as the Tory's cheer.
In the election I would have voted whoever was honest and steps up to say, we're going to have to sacrifice this, this and this for the time being as opposed to making what is clearly promises they're not going to keep.
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Leon Green Political lobbyist & Gamers Voice Director 6 years ago
I agree with Dr Wong above, we should redouble our efforts to lobby for a change in policy. If we start now we can make waves and ready for the spending review on October 20th. Gamers' Voice (declaration: I'm a trustee) are preparing a campaign around this very issue.
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[link url=http://www.develop-online.net/news/35224/Global-publisher-sabotaged-UK-games-tax-breaks
]http://www.develop-online.net/news/35224...[/link]

this possible rumour, changes things. UK taxgate scandal perhaps?
Because if true, (even remotely) will be cause for more intense renewed pressure from our Game groups.

Who would think of shooting ourselves in the own foot!
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John Bye Lead Designer, Future Games of London6 years ago
Wow. Just .. wow. If that is true, it's shocking. I can only assume it's a big publisher that doesn't do much if any development in the UK, unless they really do like shooting themselves in the foot. That kinda narrows it down a lot... Wonder how long it will take for the details to leak out.
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I think, when reporting and journalism in this country you are supposed to be able to protect the privacy of your informant/disclosure.

I'm not sure if it will help improve the lobbying issue for grounds to make UK have tax breaks. ITS very evident that when UK has such a tax relief, it can be a awesome no1 powerhouse. The creative talent is there, infrastructure. Just need to let the incentives go abit further and the game roots can flourish like spring grass/flowers.
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John Bye Lead Designer, Future Games of London6 years ago
Actually, one more possibility I thought of this morning. Maybe it's a big multinational company that does do a lot of development in the UK, but wouldn't be eligible for tax breaks because the games they make here wouldn't meet the cultural criteria? That would certainly explain Osbourne's comment about Games Tax Relief being "poorly targeted" and the comment in the Develop article that the company was lobbying against it because it was "unfair".
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John Bye Lead Designer, Future Games of London6 years ago
Incidentally, are GamesIndustry.biz following up this story as well?
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Its being run by the folks at Develop, so I'm not sure. I guess its hard to follow a story which can be quite incendiary and not "official" without their own internal inside sources.
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