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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Latest comments (8)

Jason Kingsley CEO and Creative Director, Rebellion4 years ago
I'm afraid Ian has either not read the legislation that is proposed or does not understand it. Games set in a 'fictional world' would qualify for certain of the points, and a game has to reach a minimum number of points to qualify for GTR. It does not have to qualify under all sections, just enough.

In my research I estimated that just under half of games would qualify, and that is without trying to hit the cultural targets set. Not sure where the '95% wouldn't qualify' comes from. And yes the GTR rules are specifically set to stop some games from qualifying, otherwise it wouldn't be a 'test' would it?
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Andrew Tomlinson Public Affairs and Policy Officer, UKIE4 years ago
Jason is right, this misses the allowance in the legislation for fictional/fantasy worlds. To be specific, "3/2/1 points are awarded if there is a connection with UK/European culture and at least 66%/50%/25% is set in an undetermined location." - that's from the European Commission's description of the cultural test in the decision they published back in April. We made this point to the UK government throughout the consultation process and they heard us loud and clear - 'undetermined location' is written into the test specifically for this purpose.

They've been through a lot of these questions before with the film tax relief, remember, and it's not as if films never have fictional settings.

As Jason says, although I wouldn't like to get into specifics, far more than 5% of games made in the UK could expect to get some points under this part of the test. And even those that don't might still be able to pass by getting points elsewhere.
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Jason Kingsley CEO and Creative Director, Rebellion4 years ago
Ian, I've just run your game 'Clay Jam' through the test, and assuming it is in English and made here in the UK by your team, it would qualify quite easily! If you email me I can take you through the test and how it looks like it'll be applied.
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Show all comments (8)
A game doent necessarily have to be set in UK to qualify. On the otherhand, if we opt out of EU, problem solived!
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Robin Clarke Producer, AppyNation Ltd4 years ago
Has he read the proposed test? The content requirements make up a tiny minority of the points and you can easily pass without them.

Amusingly, a lot of non-UK produced games would theoretically pass, any of the Prof. Layton games for instance.
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Iain Gilfeather Developer Relations Engineer, Unity Technologies4 years ago
Thanks to Jason and Andrew for putting me straight. I can only apologies for making an ill-informed quote as it's true that I have not read the legislation. It's good to hear that the test includes provision for "undetermined location". I'm also aware of the great work UKIE have done in pushing for this tax relief and making sure it's viable. Hearing that games like Clay Jam would qualify is also good news.

As a small bit of self defence, I was trying to say that 95% of games don't really have a real-world location and would therefore not qualify for that part of the test, not that 95% of games would fail the test. 95% is clearly a figure plucked from the air though and the bit about it being hard to see how any companies could meet the cultural test is just wrong. Sorry. I'll be more careful when speaking publicly in future.

Hopefully developers reading this article will also read the comments and any that had misconceptions similar to mine will be enlightened.

Fingers crossed, that the EU Commission approves.
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Jason Kingsley CEO and Creative Director, Rebellion4 years ago
Iain, no worries, I just don't like 'internet facts' to go uncorrected, especially when I and TIGA have been working for this tax break for over a decade. FYI your game not set in any real world location would earn slightly fewer points than a game set in London for example, but a game set in LA would not earn any points in this section as far as I am aware.
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Andrew Tomlinson Public Affairs and Policy Officer, UKIE4 years ago
No problems Iain! I guess we're all a bit antsy that it doesn't get misunderstood, because we want to make sure it has as much impact as it can once it comes into force.
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