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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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Alec Meer avatar
Alec Meer: A 10-year veteran of scribbling about video games, Alec primarily writes for Rock, Paper, Shotgun, but given any opportunity he will escape his keyboard and mouse ghetto to write about any and all formats.
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