Today Tiga will submit its long-awaited report on how the UK could implement a tax credit system.

The whole set of proposals will today end up in the hands of Sion Simon, the government’s Minster for Creative Industries. Below you will find overall conclusions to this report.

To produce this report TIGA was assisted by Game Investor Consulting, a specialist video game research company, as well as other organisations from various legal and professional sectors.

Investing in the Future

The challenges
Employment in the UK games development sector fell by 4% and 15% (44) of its companies went out of business between July 2008 and July 2009, resulting in millions in lost tax revenues. This is despite global industry sales growing by 20% in 2008 compared to 2007.

The impact of a new brain drain of experienced staff to subsidised studios overseas is beginning to bite, while overseas government support for indigenous games development industries increased as countries including Canada, Germany, Japan and South Korea increased their fiscal support.

The cultural argument
60% of the UK population plays video games, which the majority of under 16s now consider the single most important entertainment medium. Video games display many cultural characteristics and are shown to impact film, television, public service broadcasting, music, literature, fine arts, design, academia, and the internet.

Multiple governments and organisations like UNESCO and the EC agree that some video games can be cultural. A recent survey of the British public found that 86% agreed that video games can be cultural products.

The Solution
TIGA proposes a Games Tax Relief adapting existing legislation for the UK film tax relief, which resurrected the British film industry. Three rates of relief would benefit large and small games studios.

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% of UK made games profiled in an exercise for the report passed.

The Games Tax Relief is estimated to cost £54m in year one (covering current and new projects), falling to between £32m-£36m thereafter.

The impact
With 60-80 titles benefitting per year, the tax measure would assist UK game developers without distorting the larger European game development market.

NESTA’s recent survey of games developers and finance sources concludes that a tax credit will trigger growth in employment, new game development, innovation and investment, and more sustainable business models for British studios by selling directly to consumers.

The Games Tax Relief is expected over 5 years to create 1,400 new jobs in the studio sector, increasing investment by games studios by £146m, direct and indirect annual tax revenues by £133m and GDP contribution by £323m. By year 5, for every £100 of investment by government in the Games Tax Relief, the industry will invest £176.