UK games tax relief gets mixed response

UK games tax relief gets mixed response
Craig Chapple

By Craig Chapple

December 12th 2012 at 3:30PM

Developer delight over tax cuts but cultural test sparks confusion and dismay

The game industry has almost unanimously expressed its delight to yesterday’s reveal of the draft tax relief legislation and culture test.

The draft set out a tax relief rate of 25 per cent with no minimum threshold, potentially opening it up to developers of all sizes.

Although most developers are happy and excited by the idea of tax breaks and what it could mean for the game industry, some developers have voiced their disappointment over the “arbitrary” list that makes up the cultural test.

Games must accrue 16 points from these tests of ‘Britishness’, which covers whether the game is set in the UK, another EEA state or an ‘undetermined’ location, if the title is made by “qualifying persons” (i.e. developers based in Britain), whether the characters are from the UK, another EEA state or an undetermined location and if it uses English or a recongised regional or minority language.

Twitter and the comments section on Develop’s own story on the matter erupted yesterday with confusion as to whether games that lack a traditional story or characters, such as a puzzle game, would be able to qualify the cultural test.

Size Five Games Indie developer Dan Marshall told Develop that he was grateful for the tax relief legislation, that could offer more money for the studio to spend on programmers, artists and musicians, but expressed his disappointment that its aspects boiled down to character and setting.

He suggested that given the requirements listed in the cultural test, his next game The Swindle could potentially be steered towards being overtly set in London to guarantee meeting the 16 point threshold, and worries developers could lose some creativity as a result.

Flawed tests?

“The concept is great, but I’m a bit disappointed that they boil so much down to character and setting. Ostensibly, could very British miss out because their setting is too ‘fantasy’?” said Marshall.

“So, I think you’ll start to see game elements crowbarred in to take advantage of tax relief. Instead of people making genuinely culturally-British games, I’m worried we’ll see an influx of characters and settings that are by-the-numbers there to tick boxes.

“Up until today, my next game The Swindle was set in an alternate-Universe London-like city. Now I’m potentially going to be steered towards overtly setting it in London to guarantee my 16 points, and that’d be a shame because creatively there something’s been lost.

“Any arbitrary list of criteria is going to be easy to grumble about, but it shows great strides in the right direction and the whole deal is too exciting to be grumpy about. I just hope creativity and imagination aren’t cast aside to save on tax.”

Remode Studios CEO Ella Romanos also said she was not a fan of the cultural test, but was excited by the government’s decision not to implement a minimum spend threshold.

She explained that the culture test focused on a game’s content, rather than taking into consideration how a title is developed.

Romanos made an important note however, that the tests are designed as a way to get approved by the EU, and believes the tests is flexible enough for many developers to surpass.

“I'm really excited to see the government confirm that there will be no minimum spend threshold to apply for tax relief as this is the key factor in ensuring the relief is available and relevant to developers of any size,” she said.

“I'm not a fan of the cultural test, specifically that it considers the game content, rather than just looking at how the game is developed, but it is a requirement to get approved by the EU so I think what we have is the best option for this.

"In an ideal world, the relief should be about growing the UK games industry and the wider economy, and I can't see how where the game is based, or who the characters are, is relevant to that, and the result will be to put some constraints on games that won't benefit anyone and could in certain cases hinder creativity.

“However, the test is flexible and you can get points across various areas, so I think it will work and still allow the relief to be effective and allow the UK games industry to compete globally.”

An attractive proposition

Other developers including Naturalmotion’s Torsten Reil and Activision Blizzard’s UK & Ireland MD Peter Hepworth meanwhile stated they were pleased with the draft legislation, with Reil stating it seemed to strike a good balance between cultural relevance and creative freedom.

“Activision has always valued UK development talent, most recently investing in The Blast Furnace, a new mobile games studio in Leeds,” said Activision Blizzard UK & Ireland MD Peter Hepworth.

“Having fiscal incentives in place will enable us to continue to create great games in the UK and make developing here an attractive proposition for global games businesses.”

Reil said: “We’re pleased with the draft legislation as it seems to strike a good balance between cultural relevance and creative freedom. It’s also greatly increased our confidence in the UK as a place to invest, and as a direct result we’re very likely to grow our development bases right here in the UK.”

What are your thoughts on the draft tax relief legislation and cultural test? Does it allow developers to retain their creative vision while also meeting the requirements of EU law? Or do you think the test is too difficult to pass for certain types of game and needs to be amended before the legislation is passed?