TIGA's Campaign For Games Tax Relief for UK Developers
Reason
Overseas government support for video games development over the last decade has created an increasingly uneven international playing field, making it difficult for UK games developers to compete. Between July 2008 and July 2009 the headcount at British video games studios fell by 4 per cent, and 15 per cent (44) of British video games development studios, publishing and service companies went out of business. Yet global industry sales grew by 20 per cent in 2008 compared to 2007. In turn, between July 2008 and July 2009 the UK video games industry’s contribution in tax revenues to the Exchequer fell by £17 million and the sector’s contribution to Gross Domestic Product (GDP) declined by £41 million.
British-made video games are facing a long-term decline in the global sales charts, despite a record 2008. The UK is expected to fall to 5th place in 2009, overtaken by Canada and South Korea, whose studios are heavily government supported. British consumers have a strong preference for British made video games, purchasing four times more British-made video games than US consumers. Yet decline means that the British public faces decreasing access to British-made video games.
A brain drain, in particular of skilled and experienced staff, to subsidised studios overseas is beginning to bite, with a
recent survey finding this issue and overseas subsidies the top concerns of senior UK industry executives.
Effect
Games Tax Relief is expected over a five year period to: create or save 3,550 graduate level jobs (or the vocational equivalent); increase or safeguard £457 million in development expenditure; and secure £415 million in new and saved tax receipts over five years. This measure will drive sustained growth in the UK studio sector and halt the current decline in investment in and jobs. The outlay for the Government is anticipated to be £192 million over the same period.
Proposal
A Games Tax Relief should be introduced, with the following attributes:
- Eligibility for the Games Tax Relief would cover any company within the scope of UK Corporation Tax.
- Video games would need to pass a cultural test, scoring against criteria of European heritage and game locations, languages, innovation, narrative, and location of development and key development staff.
- The Games Tax Relief would be calculated and applied in a similar way to the existing tax relief for British films. A development company would be entitled to an additional deduction in computing their taxable profits equal to the UK expenditure incurred in developing a game, or 80 per cent of the total expenditure incurred in developing a game, whichever is the lower. The development company would then be entitled to a tax credit calculated on the amount of the deduction, which it would either be set off against the income from the game or recovered as a payment from HMRC.
- The Games Tax Relief should have three tiers of benefit: 20 per cent of core expenditure for budgets above £6,000,000, 25 per cent for budgets over £3,000,000 but less than £6,000,000 and 30 per cent for budgets of over £100,000 but under £3,000,000. The three tiers are designed to reflect average production budgets of video games on different games platforms, and correspondingly different sizes of company.
- An independent organisation with knowledge and experience of video games production would administer the cultural tests, checking submission criteria are met and policing the Relief. It would issue interim certificates or letters of comfort confirming a product has passed or provisionally passed the cultural test to ensure candidate projects are funded.
To find out more about this campaign or add you support please contact Richard Wilson, TIGA CEO
here.
All Party Parliamentary Group for the Computer and Video Games Industry
Tiga works to ensure that the UK Government, the Westminster Parliament, the Holyrood Parliament, key political parties, civil servants and other interested parties understand the importance, the interests and the needs of the UK video games industry. Tiga advances the cause of the games sector by working with politicians, responding to Government and Opposition consultation documents and publishing our own policy papers.
All-Party Groups can be a highly effective vehicle to raise and discuss issues amongst interested Parliamentarians. The Groups, via their Chairman, can also seek meetings with Ministers and other key political opinion formers. The Group meetings are attended by Members of the House of Commons and the House of Lords. Any Member of either House may turn up and speak at any meeting of the Group; anyone else may only attend if invited by the Group. Tiga is working to support the All Party Group on Computer and Video Games, with the assistance of politicsdirect, a public affairs agency.
To provide a forum to discuss business issues affecting video games software developers, to develop policies to enhance the sector and to champion an industry that responsibly creates content for an audience ranging from children to adults.
The Group’s officers are:
- Chairman: Bill Olner MP
- Vice-Chairman: Lord Puttnam
- Vice-Chairman: John Whittingdale MP OBE, Chairman of the House of Commons Select Committee on Culture, Media and Sport
- Vice-Chairman: Philip Davies MP
- Treasurer: Nick Palmer MP
The Group’s membership consists of:
- Bill Olner MP
- James Plaskitt MP
- David Clelland MP
- Lord Puttnam
- Nick Palmer MP
- Janet Anderson MP
- Alan Keen MP
- Lord Faulkner of Worcester
- Celia Barlow MP
- Tom Watson MP
- Philip Davies MP
- John Whittingdale OBE MP
- Nigel Evans MP
- Lord Inglewood
- Michael Fabricant MP
- Mark Field MP
- Evan Harris MP
- Lord Hugh Dykes
- Dan Rogerson MP
- Stewart Hosie MP
- Don Foster MP
- Baroness Bonham-Carter
The Group will examine issues affecting the games sector, including:
- Tax environment
- Skills and training
- Industry and university relationships