UK game industry rejoices as EU approves tax breaks

The European Commission has approved tax breaks for the UK video game industry which trade bodies estimate could result in a welcome £188 million extra per year for the rapidly-growing and increasingly important sector.

It comes after many years of campaigning for such a change – helping the UK to continue being a market-leading force in the global games industry.

Many high-profile UK game studios have closed in recent years; most-recently Blitz Games who shuttered their windows after 23 years in business. IGN put together a list of “20 Games Studios We Lost in 2012” which also featured many UK-based studios.

Two years ago a tax relief was announced by George Osborne in the 2012 budget – unfortunately being held-up by the European Commission who debated whether there was a market failure in the UK worth a tax relief… Now some big studios have had to close, they’re listening.

TIGA, the trade association representing the UK video games Industry, tirelessly campaigned to the EU Commission to move-forward with their decision.

Dr. Richard Wilson, TIGA CEO stated:

“TIGA responded to the EU’s formal investigation into GTR, and built a compelling case which demonstrated that: video games are cultural products similar to other audio-visual creations and so merit support; that the UK video game industry is competing on an un-level playing field because our key global competitors already benefit from tax relief or other forms of government support; that GTR is necessary and proportionate in design, and that it achieves all of these results without distorting trade and competition within the EU.”

Unfortunately, not all companies will benefit. Projects must pass a “cultural test” in which points are awarded for the amount of development undertaken in the UK, the fact that certain job roles are carried out by UK staff, and whether at least half the game's overall team are from the UK.

Extra points will be given if the game is set in the UK or an EU state; the characters are from the region, and whether the gameplay features a “British story” relating to the culture. Developers have expressed their concern about this test – and games may be impacted by attempting to adapt artistic vision to allow for potentially vital tax relief… Around 25 percent of UK-produced games are expected to be eligible.

Mike Bithell, creator of indie hit ‘Thomas Was Alone’, tweeted:

Elaine Green, owner of Nellyvision, an independent studio formed after the Second Life makers Linden Lab closed down in the UK in 2010:

“As a smaller developer dealing with all the challenges small businesses in the UK face whilst also competing against foreign businesses who have been receiving generous tax breaks, this is a break-through moment. As a result of TIGA's successful campaign, Games Tax Relief will help us reduce our costs, grow our business and ultimately make a greater contribution to the UK economy.”

Do you think the new tax relief for UK game studios is overdue?

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