UK Gaming Industry Catches A Break With New Tax Relief

There was great news last week for gaming companies in the UK as the Games Tax Relief (GTR) legislation officially went into full effect. Companies who develop or publish video games will be able to claim up to 25% of their production costs as tax credits. The gaming industry has waited over two years for this plan to be scrutinised before Parliament and the EU.

The GTR was already approved by British government, but its progress came to a halt in late March when EU rules threatened to ban it. The European Commission investigated the GTR on the grounds that these tax breaks for businesses could violate regulations on state aid. Through April, the Commission released several statements expressing its doubt that the aid was legal, necessary and fair to other Member States.

Some brilliant mind must have foreseen this problem because the Bill was proposed as an incentive for companies to produce games that reflect British culture. That’s right, the ‘catch’ to receiving the tax break is that the game must display British culture in its content, development and personnel. The Commission ultimately determined there would be a decline in new culturally British games without the GTR, thus allowing the benefits.

The above chart breaks down the point system for determining if a game is culturally British. A company only needs 16 out of a possible 31 points to be eligible for the break. The big shots like Slightly Mad Studios, Codemasters, Criterion Games, and Ubisoft’s Reflections Studio will be looking to take advantage of the deal immediately.

The potential benefit is also great for smaller studios and indie developers of all game genres. Culture minister Ed Vaizey praised the new tax credit, saying “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…Our video games companies are already regarded as world leaders and our ongoing support will ensure they continue to grow.” Can anyone remember the last time a government figure talked this way about video games?

The Independent Game Developer’s Association estimates over £450 million in productions costs will be spared taxation over the next five years, and that a steady increase in new jobs will accompany these savings. The UK already houses some legends of game development, and this incentive will surely bring more.