Could the EU be UK tax breaks' ultimate hurdle?

Could the EU be UK tax breaks' ultimate hurdle?
Will Freeman

By Will Freeman

January 29th 2013 at 12:39PM

We're not there yet, warns cautious Take-Two SVP Seb Belcher

Speaking at a UKIE-hosted event yesterday, senior games industry figures warned that the EU remains a point of caution for the final establishment of financial relief from government for UK developers.

The event, which gathered developers with accountants, industry veterans and those versed in the film tax breaks, focused on understanding the details of the UK tax relief, and the process of finalising the legislation in time for its planned final introduction on April 1st this year.

However, during open debate at the gathering, some highlighted the European Union's ability to block the campaign at the final hurdle that is EU approval.

"This still has to go through the European Union," warned an otherwise optimistic Seb Belcher, senior vice president and head of international legal for Take-Two Interactive Software.

"Rightly or wrongly – and for how long I don't know as a referendum on the EU is coming up – we are in a trading block, which, probably for good reasons, does not want to distort competition between member states.

"So state aid as a whole is effectively not allowed for specific industries," he continued. "There are many exceptions, and the key one that matters to us is the 'promotion of cultural products'. The cultural test [within the games tax breaks draft legislation] is important from the EU's perspective, and if we were to feel that perhaps the EU doesn't have the same support of games as a cultural product as it may do for other creative industries, then we've still got to pass that hurdle."

Belcher did, however, point out that games look set to enjoy a simpler, more welcoming cultural test than that that applied to film, but claimed it is still a possibility that the EU may want a tougher test.

"If we get to that stage, where the EU start to require specific points in certain areas of the [cultural] test, then the legislation and the interpretation of that legislation becomes increasingly important," said Belcher.

"I personally am slightly concerned. We [the UK] have had a very receptive Government," offered Mastertronic and UKIE chairman Andy Payne, later adding: "But then you run into – and I'm a big supporter of Europe personally – that thing called Brussels. I just wonder, echoing what Seb says, if this will be seen to be a blocking movement.

"We've got good lobbying going on out there, and I think games are reasonably understood, but the EU are behind the curve on many things, and they're certainly behind the curve on games and what games are."

The consultation with the government concludes on February 6th this year, meaning details of the tax breaks can still be changed, but most appear confident the current draft of legislation recognises the games industry's concerns and offers a workable fit for the industry, where no cap on the pool available to developers has been set.

Yesterday it also emerged that a number of developers see it as key that the UK stay a member of the EU, for a number of business reasons.