Studio bosses issue tax breaks report to Government

Studio bosses issue tax breaks report to Government
Craig Chapple

By Craig Chapple

February 16th 2012 at 12:01AM

Tiga backed document proposes incentives to support the 'growth and viability' of UK development

UK industry heads have lent their support and recommendations to a targeted tax relief report for the country’s development sector.

Created by trade association Tiga, the report proposes plans “for supporting the growth and viability” of more independent developers and digital publishers.

The organisation claims that tax incentives over five years could create more than 4,660 jobs, whilst attracting £188 million worth of investment in the UK industry.

It says the scheme would cost the UK taxpayer £96 million over the same period.

It is backed by leading industry bosses such as Brian Ward, senior VP of worldwide studios at Activision, Gareth Edmondson, CEO of Thumbstar Games, Blitz Studios CEO Philip Oliver and Jagex head Mark Gerhard.

Targeted relief

The 92-page report proposes a reduction in tax payable on profits made by developers, whilst also offering cash tax credit to reduce losses, should a game fail to make a profit.

Two rates are recommended by the document dependent on production budget. Firstly a 20 per cent tax relief on core expenditure from a development budget in excess of £3 million.

Secondly, a 25 per cent tax cut for games that cost less than £3 million, with a minimum limit of £50,000 to be eligible for the incentives.

The Tiga document states that games would need to also pass cultural tests to take advantage of tax breaks, scoring against a criteria of European European heritage and game locations, innovation and location of development staff.

Of those profiled for the report less than half, 44 per cent, met the cultural test requirements.

“Our well-targeted games tax relief will generate employment and investment in the UK video games sector and so contribute to economic growth and to the rebalancing of our economy away from an over-dependence on financial services,” said Tiga CEO Richard Wilson.

“The Government has an opportunity to back our sector in the March Budget: it must seize the chance.”

Activision’s Brian Ward added: “The introduction of games tax relief in the UK would level the playing field and make the UK competitive again.

“As has been amply proven in other jurisdictions, Games Tax Relief will lead to increased investment, significant job creation and economic growth. Games Tax Relief is good for the UK games industry and good for the UK economy.”

Concerns for the UK

The report labels the current concerns of the country’s developers. It states that it is competing on an un-level playing field with countries like Canada and the USA due to their well-established incentive schemes.

It also details employment in the UK development sector has declined by more than ten per cent since 2008, with 41 per cent of those who lost there jobs in games development in the last 3 years moving abroad to find work.

For the government to enact any such tax initiative for the UK’s games development sector, it would first have to overcome various obstables, such as the current Europe-wide ban on state aid.

The EU has yet to currently renew the game tax breaks it recognised as an exception to tax relief in 2007, having expired at the end of last year.

Unless the exemption is extended, the UK would be unable to enact tax breaks.