Clause in proposed UK tax credit plan ‘could be mishandled’
Concerns are being voiced from within the UK games sector over proposed plans to apply a ‘culturally British’ proviso to a long-awaited tax relief system.
The Government is currently reviewing whether the UK games industry deserves better tax breaks in order to make the sector more globally competitive.
As outlined in the Digital Britain report, if such a review is in favour of the industry, then UK dev projects will receive tax breaks if they are deemed to be making “culturally British video games.”
But in a new report published by NESTA, industry members from within the UK revealed their scepticism of the idea.
“The definition of ‘cultural’ is worrying… I can see designers everywhere being forced to shoehorn ‘cultural’ into their games in order to qualify for the credits, which compromises the creativity and perhaps also the quality of the games,” said one anonymous industry executive in the report.
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“We might end up with some fabulous and lucrative new ideas just not being made,” he added, “because an ultimately less successful, but also less risky, ‘cultural’ venture would be financially easier on the company.”
“This leaves the door open for other less shackled countries to capitalise on the new ideas.”
NESTA’s groundbreaking survey received responses from people working for the likes of Activision, Microsoft, Bethesda, Eidos, Sony Computer Entertainment, Ubisoft, Realtime Worlds, Bizarre Creations, Codemasters, THQ, Frontier, Rebellion and Sports Interactive.
All respondents were given the option of anonymity.
The report, which you can read for yourself here, claimed that “there are concerns about the implementation of the tax credit, particularly in regards to the application of cultural criteria, and the administration of the scheme.”
Most of the survey’s respondents said that the benefits from the tax credit will be limited “if it is managed in an excessively bureaucratic fashion”, and if the credit is not given at the concept stage of development, or indeed if it is not paid in a timely manner.
Yet there remains much confusion on how a ‘culturally British’ test will work. The UK Department for Culture told Develop that it would be “based on the same rules that we have for films”, though details remain scarce.
“Many fear that the scheme will operate over a few years before being withdrawn or substantially modified,” The NESTA report added.
“These are potentially disastrous scenarios for an industry where a typical project might take between 18 and 30 months to complete,” it said.
One respondent told NESTA that a poorly implemented scheme “that does not take into account the unique funding and production processes for video games could do more harm than good, and possibly even result in company closures.”
Another anonymous respondent stated that his company tends to make adult-rated games, and is concerned that the tax relief system will not apply to such games.
As well as this, NESTA reports that a quarter of respondents said that a ‘culturally British’ game could reduce a developer’s ability to create global hits.
This was not a unanimous sentiment, however. Michael Denny of SCE Worldwide Studios Europe – who, in this instance, declined anonymity – said it was perfectly possible develop ‘culturally British’ games that could sell globally.
“The two are not mutually exclusive,” he said. “It is perfectly possible to create major international games IPs that are inherently British such as LittleBigPlanet or Tomb Raider.”
Overall, 87 per cent of NESTA’s respondents said that, in principle, there should be no problems with the cultural stipulation “as long as it is administered properly”.
NESTA added: “Our respondents are mainly concerned about how strictly applied will the ‘cultural test’ to qualify for the tax credit be, the time-frames for qualification and payment, and the length of the government’s commitment to it.”
Unless I'm mistaken, isn't the cultural bit in there because EU law generally refuses to allow any kind of state subsidy for a business unless it falls within a small number of exceptions, one of these being to do with cultural heritage? Hence the need for a cultural test.
I've been thinking about this a lot, and wonder if it's not best tackled at the EU level, tbh. France, Germany, the UK, others - we're all suffering from the heavily subsidised competition from across the pond, and perhaps action needs to be taken by the EU, who can amend the restraints, rather than the UK, who has to work within them.
Having said that, UK tax breaks would be a good start.
As the CEO of a french company who applied five times to the tax break in France I would simply give you one advice : don't do that.
I was full of hope that this tax break could make us more competitive but as each of my file were rejected (even a fashion game with voices in French in the English version was rejected) I could only see how it distorted the playing field.
Currently in France there is a lot of people angry toward this tax break story for a lot of different reason but mainly because most of the applicant were rejected.
So my advice : don't.
“culturally British video games.” - No tax credits for Codemasters then, who seem like they're on a mission to make their games as Americanised as possible.
Take a look at Tripwire's recent title 'Killing Floor' - eminently 'British' in design from level maps to in game character skins and voices. Or how about CoD4's 'Soap MvTavish'? Comedy name aside - more than half of the single player campaign is clearly 'culturally British' and it was developed by Yanks. The world loves us. Britishness still sells.
Not really that hard is it? Just make your game something the British gamer can relate to - worldwide sales are unlikely to be compromised if the game is any good. We're all getting sick of the americanised AAA titles anyway.
Constraints stimulate focused and skilful design. Entrepeneurial companies will be able to make the "culturally British" requirement work to their benefit.
I think we tend to worry that Grand Theft Auto 4 couldn't have qualified as "culturally British". Which is a concern if we're focused on hoping that tax relief will help counteract the rising cost of development of AAA games aimed at a "gamer" stereotype audience. Is this the case, or are there other perspectives seeing the opportunities more?
What is British anyway? The problem with this approach is that it becomes entirley subjective.
I believe the Film Industry caused a lot of problems with tax relief because every film appled for it. The Criteria meant that even a totally rubbish film, as long as it jumped through the right hoops, got the tax break. This led to films needing a "British, cultural" aspect so that the government could then subjectively decide who gets the money. The same will happen with games, only the "approved" projects get funded. Would the government approve of GTA....and should a hugely successful project get a tax break anyway...?
I think you could put that in general, I can't recall the last game made by a British company set in Britain.
Well there was The Getaway III, but that was cancelled.
It is a nightmare, I pitched a survival horror one years ago, noone was interested just because it was set in Britain.
It would be a nice incentive to have some games set in places that AREN'T New York for once.
Here is the test that the government will apply:
1) Does it have Jellied Eels in it?
2) Will there be some horribly cliched cockney accent in it?
3) Will there be an amusing jape focusing on the 'battle' between "norvern monkeys" and "savvan fairies"?
4) Will Guy Ritchie have anything to do with it?
5) Does Hugh Grant have a VO role?
If any (or more) of the above are true, it will get the tax credit.
Simple.
"Constraints stimulate focused and skilful design."
While I think that's true, it only applies at a technical level. When it comes to design (which is what we're talking about here), constraints like this only hamper creativity.
An interesting case to look at is Creative Assembly. Take Empire: Total War, that game definitely has a strong British identity, and I could easily see a game like that qualifying for a tax break. But what are their options if they want to qualify in the future? Certainly games like Viking, Spartan or Shogun would be out of the question.
