Games Developers Can Now Claim Tax Relief

A tax relief scheme which came into effect on Tuesday will allow games developers creating ‘culturally British’ video games to claim tax relief on some of the game’s production costs. Companies may be able to claim as much as 25% of the cost in relief under the scheme, which was introduced by Culture Minister Ed Vaizey.

He said: “The government is acutely aware of the huge contribution that the creative industries make to the UK economy. As part of our long term economic plan we are ensuring that the right conditions are in place to nurture industries like the video games sector, and these tax reliefs are pivotal in ensuring we can compete on a global stage… Our video games companies are already regarded as world leaders, and our ongoing support will ensure they continue to grow from strength to strength.”

All developers need to do to apply for the grant is speak to the industry’s governing body, the BFI, to determine if the game they are producing passes a specially designed British culture test. If it does then the developer will be eligible to claim some tax relief.

The culture requirement was introduced to combat concerns that initial plans for a grant would be in contradiction of EU state aid rules, which aim to ensure fair competition across the industry by preventing member states from providing incentives and advantages to commercial companies.

The caveat to this is that state aid can be provided if the product in question is considered to be part of the cultural development of the country.

The scheme was initially announced in March with the Commission claiming: “The UK demonstrated in particular that the proposed cultural test ensures that the aid supports only games that are of cultural value. Only around 25% of UK produced games would be eligible for aid. Without this support the number of new culturally British games is likely to decline considerably.”

A number of games trade bodies have welcomed the news, with chief executve of TIGA Dr Richard Wilson stating: “The tax relief will unleash the financial and creative potential of the UK’s game businesses, benefit studios of all shapes and sizes and boost the production of culturally British video games. TIGA’s own research indicates that over five years the tax relief will create and protect 10,300 direct and indirect jobs and create and protect approximately £450 million investment expenditure by UK studios.”

The scheme is being lauded not only for its cultural potential but also its economic effects. As mentioned by Dr Wilson, it is estimated that as many as 10,300 jobs could be created as part of the scheme, allowing a growing technological sector of the market to truly develop and benefit the UK’s economy.

Developers who are interested in potentially gaining tax relief for their project should head to the BFI website to apply via the cultural test which is hosted there.

Credit for the image used in this news article is given to Maria Giulia Tolotti