European Commission approves UK games tax reliefs
Tax relief for UK video games development will come into effect from April 1, 2014, after the European Commission approved a long-anticipated change to the UK tax rules.
UK Chancellor George Osborne welcomed the Commission's decision, following an investigation into the relief in order for it to receive state aid approval
First announced in the 2012 UK Budget in response to a long-running campaign by the games industry, the relief will provide support for development of video games which meet a set of criteria to qualify as UK games. These criteria will relate to the proportion of the games's content and characters that are from the UK.
The relief enables companies to be eligible for a payable tax credit worth 25% of qualifying production costs, and builds on the successful model of the film tax relief which can be claimed on production expenditure in the UK, and the new High-End TV and animation tax reliefs.
Under the new rules, one company involved in the development of a video game can claim the tax relief, provided that a minimum of 25% of the core development budget for the game has been invested in the European Economic Area. There is also a £1m cap on sub-contracted expenditure. More information on the tax reliefs is available here.
There are currently around 500 games development studios in the UK, employing around 9000 staff. In 2013 sales of video games in the UK totalled £2.19 billion.
Commenting on the decision by the Commission, George Osborne said: “This is a key industry of the future and I want Britain to be one of its biggest centres. 95% of UK video games companies in the UK are SMEs. This relief is one of the most generous in the world.”
It is estimated that the relief will provide around £35 million of support a year to the sector.
In 2011 to 2012 the film tax relief provided more than £200 million of support to around 200 films. Since its introduction in 2007, direct employment within the sector has almost doubled and 1,050 film productions have made 1,900 claims, for a total £1.1 billion.
State aid approval has already been received for high-end television and animation, which were also announced at Budget 2012. These reliefs come into effect from 1 April 2013.
Creative industries Minister Ed Vaizey said: “This is tremendous news for the supremely talented and creative UK games sector. The government recognises the important contribution the industry makes to the economy and is committed to supporting the industry’s continued growth through a range of measures like these new tax reliefs.”
Dr Jo Twist, CEO of UK games and interactive entertainment trade body, Ukie, added: “This is amazing news for the UK games and interactive entertainment sector and will help developers of all shapes and sizes to grow and make more games right here in the UK. This is the culmination of an immense amount of hard work and we’re delighted to have played our part in a collective effort to get the tax reliefs in place.”
“We now look forward to helping games businesses to access the relief and we’ll be working even harder to make the UK the best place in the world to make games. We’d like to thank UK government for their support, in particular HM Treasury and DCMS.”
Dr Richard Wilson, CEO of TIGA, the association for games developers and digital publishers, said: “This is a coup for the government, a superb decision by the EU Commission, and magnificent news for the UK video games industry. TIGA has been campaigning for video games tax relief for seven years because it will create jobs, boost investment and enable the production of more British video games.
“Tax breaks for games production will help the UK fight its way back to the forefront of video game development. The video games tax relief will benefit a highly skilled, high-tech, R&D intensive and global export focused industry."