TIGA Promises Successful Future for UK Games Studios with Targeted Games Tax Relief

TIGA, the trade association representing the UK games industry, today submitted detailed evidence to HM Treasury and to the Department of Culture, Media and Sport for the implementation of a new well-targeted Games Tax Relief. The report, A Video Games Tax Relief: An Incentive to Build a Sustainable Video Games Development Sector,proposes plans for supporting the growth and viability of more independent developers and digital publishers.

The proposed Games Tax Relief would create over 4,660 highly skilled jobs and trigger millions of pounds in investment in the UK video games industry, thereby contributing to a rebalancing of the economy away from an over-dependence on financial services towards export oriented industries where the UK has a competitive advantage.

The new Games Tax Relief would operate in the same way as the existing Film Tax Relief. It will provide a consistent approach for film and interactive entertainment, two creative industries in which the UK excel, and so remove the current anomaly that tax relief is only available for one of these two industries.

The threat

  • The UK games industry iscompeting on an un-level playing field. Game developers in countries including Canada, France, Singapore and the USA receive tax breaks for games production, which effectively reduces the cost of game development. No tax break for games production exists in the UK. The UK is missing out on investment and employment in the video games sector.
  • Employment in the UK games development sector has declined by over 10 per cent since 2008. Conversely, the Canadian games industry’s workforce grew by 33 per cent between 2008 and 2010.
  • New data reveals that 41 per cent of the jobs lost to the UK games development sector between 2009 and 2011 relocated overseas, mostly to Canada.
  • The UK’s share of global investment (venture capital and private equity) in the games industry declined from 10 per cent in the mid-2000s to 3.5 per cent.
  • Poor access to finance restricts the growth potential of games companies and has contributed to company mortality: although 208 studios started up between 2008 and 2011, there were 197 failures.
 

The opportunity

  • The global games industry has grown by 23 per cent through the global financial turmoil, and is projected to grow by 8.2 per cent each year to 2015 [1]
  • The UK video game development industry is still the largest in Europe . With the right fiscal support from the Westminster and Scottish governments, the UK and Scottish game development sectors can take advantage of this projected growth and also contribute to the rebalancing of the economy, moving away from an over-dependence on financial services.
 

The Solution

TIGA proposes a well-targeted Games Tax Relief to enable UK video games developers and digital publishers to compete on a level playing field and to improve access to finance.

In order to qualify for Games Tax Relief video games would need to pass a cultural test, scoring against criteria of European heritage and game locations, languages, innovation, narrative, and location of development and key development staff. 44 per cent of UK-made video games profiled in an exercise for this report would meet the cultural test.

How Games Tax Relief works: If the game makes a profit, the development company would then be able to use the Games Tax Relief to reduce the amount of tax payable on that profit.  If the game makes a loss, the development company would be able to use the Games Tax Relief to obtain a cash tax credit which would reduce that loss.

  • Games Tax Relief helps smaller, British owned studios: TIGA propose two rates of Games Tax Relief depending on the amount of the production budget:  a) 20 per cent of the UK core expenditure in respect of games with a development budget in excess of £3m; b) 25 per cent of the UK core expenditure in respect of games with a development budget that is less than £3m but in excess of £50,000. This will ensure that smaller projects, which are more likely to be created by British owned businesses, will benefit.
 

The impact

  • Over five years TIGA’s targeted Games Tax Relief would generate and safeguard: 4,661 direct and indirect jobs; £188 million in investment expenditure by studios; increase the games development sector’s contribution to UK GDP by £283 million; generate £172 million in new and protected tax receipts to HM Treasury, and could cost just £96 million over five years. Our revised Games Tax Relief would more than pay for itself.
  • The new Games Tax Relief is designed to assist the entire games industry in the UK .  It can be claimed by both independent UK studios and by UK studios owned by an overseas company.  Similarly it can be claimed in respect of all types of qualifying games, and so can be applied not just to traditional video games for games consoles, but also to online games and social and mobile games. 
Dr Richard Wilson, TIGA CEO, said:

“The UK video games sector provides high skilled employment in an R&D intensive, export focused industry. Our well-targeted Games Tax Relief will generate employment and investment in the UK video games sector and so contribute to economic growth and to the rebalancing of our economy away from an over-dependence on financial services. The Government has an opportunity to back our sector in the March Budget: it must seize the chance.”

John Whittingdale OBE MP, wrote a Foreword to TIGA’s report. He commented:

“The opportunity for Britain is clear. The global games industry has grown by 23 per cent through the global financial turmoil, and is projected to grow by over 8 per cent each year to 2015. If the right support from Government is forthcoming, the UK game development sector can take advantage of this projected growth, consequently contributing to the rebalancing of the UK economy.”
Leading members of the video games industry make the following statements about the need for tax credits:

Oli Christie, CEO of Neon Play, said:

"At Neon Play, we make mobile games and we export to over 120 countries with only 23% of our sales coming from the UK. Yet the international app market is becoming more and more competitive and in order for us to compete on a level playing field, we need the government to listen very, very carefully to what TIGA is proposing and instigate this Games Tax Relief. If they don't, it could be game over for the talented and vitally important UK games industry. We desperately need action. Now."

Brian Ward, Senior Vice President, Worldwide Studios, Activision, explains the company’s reasons for supporting TIGA’s proposal for Games Tax Relief:

“The UK has one of the most capable and creative development workforces, and a long history of innovation and leadership in digital media. However, this leadership position has been lost to other countries that have aggressively pursued job creation and economic diversification via tax incentive programs aimed at games and digital media. The introduction of Games Tax Relief in the UK would level the playing field and make the UK competitive again. As has been amply proven in other jurisdictions, Games Tax Relief will lead to increased investment, significant job creation and economic growth. Games Tax Relief is good for the UK games industry and good for the UK economy.”

Gareth Edmondson, CEO of Thumbstar Games and former MD of Ubisoft Reflections, said:

“As a UK based developer and publisher and a strong supporter of the UK games industry I wholeheartedly back this measure. It will definitively have the following positive effects. Firstly, it will level the playing field with our overseas competitors who already benefit from tax breaks and so enable UK developers and digital publishers to grow their businesses, take on more talented staff and produce more games at competitive costs. Secondly, this in turn will feed our UK based publishing business for exporting content to world markets. Thirdly, by supporting other UK based development talent it will allow us to sign more third party independent developers from within the UK, as opposed to looking offshore. Fourthly, this will consequently feed our publishing business allowing us to export UK developed games to the rest of the world. It is a very simple virtuous cycle that drives a largely export business.”

Philip Oliver, CEO of Blitz Studios, said:

“The UK in the past had an early lead in digital creative industries, but with years of under investment we have fallen behind many other countries in what is a very important industry of the future. Video games are the entertainment medium of the 21 st Century and the UK needs support from the Government to innovate and create the next global phenomena which will create many hundreds if not thousands of jobs and huge tax revenues in the future. We have the skills, the passion and the ideas, but funding is always an issue. Support from the Government through a Games Tax Relief would encourage companies, investors and high net worth private individuals to invest in games and create sustainable jobs instantly.”

Mark Gerhard, CEO of Jagex, said:

 “Games Tax Relief will lead to increased investment, more job creation and power economic growth. Games Tax Relief will help the new wave of digital developers and publishers in the UK. Games Tax Relief is good for the UK games industry and good for the UK economy.”

Colin Anderson, MD of Denki, said:

"Denki is one of a small number of UK studios that has successfully invested in creating its own IP over the years, but the process of financing that has been, and continues to be, a constant struggle for the business.  The well-considered and highly targeted Games Tax Relief proposed by TIGA addresses the main issues that businesses such as Denki face in attracting investment finance and managing our research and development of new projects in a sustainable way."

Ends

Notes to editors:

TIGA is the trade association representing the UK’s games industry. The majority of our members are either independent games developers or in-house publisher owned developers. We also have games publishers, outsourcing companies, technology businesses and universities amongst our membership. TIGA won 10 business awards and was nominated a finalist for 9 other awards during 2010 and 2011.  In 2010 TIGA won two business awards including ‘Trade Association of the Year’ from the Trade Association Forum.

In 2011, TIGA won eight business awards including ‘Trade Association of the Year’ from the Trade Association Forum, ‘Outstanding Organisation’ from the Chartered Management Institute and two Global Business Excellence Awards, including ‘Outstanding Marketing Campaign’.  Richard Wilson won the ‘Leadership Award’ from the Trade Association Forum and the ‘Outstanding Leader’ award from the Chartered Management Institute. TIGA is an Investors in People organisation.

TIGA's vision is to make the UK the best place in the world to do games business.  We focus on three sets of activities: political representation, generating media coverage and developing services that enhance the competitiveness of our members.  This means that TIGA members are effectively represented in the corridors of power, their voice is heard in the media and they receive benefits that make a material difference to their businesses, including a reduction in costs and improved commercial opportunities.

For further information, please contact Dr Richard Wilson, TIGA CEO on: 07875 939 643, or email richard.wilson@tiga.org .  


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