No minimum spend threshold as government looks to support developers of all sizes

UK Gov details draft legislation for games tax relief

The UK government has detailed its plans for the UK games tax relief following a period of consultation with developers across the country.

In last week’s Autumn Statement, the Government announced that the games industry tax relief rate would be set at 25 per cent of qualifying expenditure.

The tax breaks are now confirmed to come into effect from April 1st next year.

One of the most surprising acts of the new draft legislation is that there will be no minimum spend threshold for developers.

This will likely help small indie developers apply for tax breaks under the new scheme, as long as they pass the UK cultural test for video games, which we have detailed in full here.

At the time of the 2012 Budget, it was stated that the tax breaks would deliver relief of £15 million in the year covering 2013-to-14, and £35 million in the period from 2014-to-15.

In response to feedback provided from the industry, the draft legislation also states that the government will allow all direct production expenditure to be eligible for relief, in line with the existing treatment available under the film tax relief.

Early stage costs integral to the production process will also be eligible for tax breaks once a commercial decision to develop a complete game has been made.

As well as direct production and early stage costs being covered, the government has said it also intends to allow all direct development expenditure – including “relevant” quality assurance – incurred after the release of a qualifying game to be eligible for relief. This will however exclude all service maintenance costs.

Games excluded from tax breaks will be those developed with the “primary purpose” of advertising and gambling. Developers will however be allowed to do some product placement or in-game advertising.

The exclusion of pornographic and other extreme material meanwhile will be left for developers to self-certify during the tax relief application process.

A statement from the government note that it agreed with industry consensus "that companies applying for the relief should not be required to have received an age rating from a designated ratings body as this would not meet the criteria to keep the relief simple for businesses to use and there may be practical problems given that age classification certificates are only formally issued to finished products.”

The government will set up arrangements for HMRC to administer the new creative sector tax reliefs in line with the current administration of the film tax breaks with a comprehensive guide on the new regime in 2013.

In regards to talent and skills development for the game industry, the government announced during the Autumn Statement that it would match voluntary industry contributions of up to £6 million over the next two years into the existing Skills Investment Fund administered by Creative Skillset.

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