UK Games Industry Calls For Tax Breaks

by Robin Pilgrim, LawAndTax-News.com, London

03 March 2009

New research conducted by games development industry body TIGA suggests that the UK games development sector is being held back by the government’s current tax regime.

According to TIGA, the research - which is based on a survey of games businesses - looks in detail at the state of the UK video games development sector at a time when the UK is falling down the world rankings.

Until 2006, the industry was the third largest in the world based on revenue. However, the UK slipped to fourth position in 2007 and is expected to fall to fifth place in 2009. TIGA states that this is primarily due to the substantial support given by overseas governments to their video games industries in comparison to that given by the UK Government.

Commentating on the state of the industry, Richard Wilson, CEO at Tiga explained:

"The UK games development sector is an industry of the future. It is a highly skilled, knowledge based industry that has huge potential. However, the significant support overseas governments give to their games industries puts the UK games industry at a severe competitive disadvantage. This factor, coupled with difficulties in sourcing finance and skill shortages, are currently barriers to growth and must be addressed."

The research looked at the main barriers to growth over the last 12 months. 41% cited foreign government subsidized competition and 31% said the domestic tax burden on business was a problem. Of this, Mr Wilson remarked:

"The UK games development industry is competing with one hand tied behind its back. Competitor countries from Canada and the USA to France and South Korea are benefiting from government support, most notably tax breaks. This puts the UK at an immediate disadvantage."

When asked what Government policies could help their business, 85% backed tax breaks for production, 77% recommended more liberal R&D tax credits, 51% called for lower corporation tax and 50% advocated lower rates of national insurance contributions.

Mr Wilson concluded:

"If we want the UK games industry to remain in the premiership the Government must act. An announcement in the 2009 Budget to introduce a 20% tax break for games production would be a welcome start. This is similar to the EU approved French regime that applies to games that pass a cultural test."

"With a tax break of this kind in place, an additional GBP220m (USD309m) could be invested, creating a further 1,600 high quality jobs over five years. This tax measure would also help to level the international playing field. If the Government sits on its hands and does nothing, investment in the industry could fall by up to GBP180m and nearly 1,700 jobs could be lost over the same five year period.”

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