Fears over â??culturally Britishâ?? tax test

Fears over â??culturally Britishâ?? tax test

By Rob Crossley

August 27th 2009 at 9:46AM

Clause in proposed UK tax credit plan â??could be mishandledâ??

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.

“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.”