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Video games companies to begin claiming tax relief

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Video games companies across the UK will be able to begin claiming tax relief up to 25% on their production costs from today.

Video games companies across the UK will be able to begin claiming tax relief on their production costs, as the government’s cultural regulations come into force today, 19 August 2014.

With tax relief only available for companies producing games that are certified as culturally British, today’s milestone marks the completion of the legislation and will see the first companies begin to benefit.

The cultural test ensures that the tax relief supports the production of culturally British games.

Video games must achieve a level of points which they are awarded based on their cultural content, cultural contribution and the location of the game’s development and nationalities of key personnel working on the project.

The BFI has already received a number of applications that pass the cultural test. These include Dino Tribes by Blazing Griffin, MazeCraft by PW Studio, Beyond Flesh & Blood by Pixel Bomb Games, Mega Coin Squad by Big Pixel Studios and Spacepants by Boxface Games.

Financial Secretary to the Treasury, David Gauke, said:

The government is committed to supporting the creative industries, which make a valuable cultural and economic contribution to the UK.

From today, companies will be able to really benefit from the tax relief we have introduced, enabling the UK to continue to be a world-class producer of video games.

Minister for Culture and the Digital Economy, Ed Vaizey, 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.

From Lego Star Wars to Moshi Monsters, our video games companies are already regarded as world leaders, and our ongoing support will ensure they continue to grow from strength to strength.

BFI Chief Executive, Amanda Nevill, said:

Video games play an important part in the UK’s thriving creative industries, so we are delighted that the process for supporting the development of new video games to qualify for the new tax relief has got off the ground quickly and smoothly with the first certificates being issued this week.

Dr Jo Twist, CEO of Ukie, said:

It has taken years of hard work and dedication by many people in the industry and government to create the most innovative, inclusive, and future proof games tax relief scheme in the world at a time when it is most needed.

We worked very closely with government to make sure this scheme benefits every type and size of developer, and that it recognises the importance of post-release production in games.

This is a historical and exciting moment for our sector, and we will continue to work with our partners, such as the UKTI, to make sure we spread the word nationally and internationally.

Dr Richard Wilson, CEO of TIGA, said:

It is great to see the final legislation behind video games tax relief coming into force.

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.

We look forward to seeing developers and digital publishers drive our high-tech, creative and culturally valuable industry to new heights.

From today formal certificates for games that pass the cultural test can be issued by the BFI, which administers the cultural test process for the government, and the companies making these games can start claiming their tax relief against qualifying expenditure incurred since 1 April.

Video games tax relief builds on the successful model of the film tax relief. Like the High-End TV and animation tax reliefs, development companies are eligible for a payable tax credit worth 25% of qualifying costs.

95% of UK video games developers are SMEs. It is estimated that this generous new corporation tax relief will provide around £35 million of support per year to the sector.

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.

Image by jDevaun on Flickr. Used under creative commons.