Published on March 20th, 2013 | by Fraser Brown2
The European Commission throws a spanner in the works halting UK games tax relief
A wee while ago — to the interest of exactly nobody here — I wrote about a 25% tax relief for game developers in the UK, announced by the Chancellor of the Exchequer. Basically, it meant that if 25% of the core expenditure on a game was spent in the UK, the developer would be able to claim this tax relief. It may have sounded a bit boring, lots of numbers and jargon were involved, but it was rather important.
The UK has a lot of game developers for such a small country, and many of them are independent developers, struggling to stay afloat. This tax relief would have given them a significant break. The quirk in this tax relief was that the hypothetical game in question would need to fulfil certain cultural quotas, such as being set in Europe, being mainly developed in the UK, being entirely in English, that sort of thing. Each of those things would give a game point, and if it got 16 points it would be eligible for the tax relief.
I was, admittedly, a tad worried at first. Initially it sounded like developers would be required to promote British culture, which I felt would be pandering to nationalism. The reality was an easier pill to swallow, and what it really meant was that the game just needed to be developed in the UK and the development team needed to be primarily European. These things made sense, since the point was for the tax relief to help UK developers, not international developers who just so happened to have an office in blighty. Things have not gone according to plan, reveals Games Industry International today, and the European Commission did not approve the cultural test.
For those outside the EU, this might all seem a bit odd. But, unfortunately, the UK has to run tax relief initiatives through the European Commission before they can be approved, an ostensibly foreign body. About half of the members of the Commission are not elected by residents of the nation states within the EU, rather they are selected by the European Council in accordance with the Commission President. So, these are, frequently, unelected officials making decisions that have ramifications for all countries within the Union. The Commission also employs a large amount of civil servants, who are also, just as with most civil servants in the individual nations, not elected. This executive body essentially runs the EU, proposing legislation and seeing to it that these international laws are upheld.
The tax relief initiative’s requirement to employ a cultural test is a European law, not a UK one. The Commission has not approved the cultural test used to decide which developer gets tax relief, however, and so the initiative has been held up. Jo Swift, CEO of the UK trade body UKIE was not completely surprised by this obstacle. “We were prepared for this as it was always a possibility when establishing an entirely new European tax scheme, especially as games are so different to film and TV.”
Swift continued, “We are confident of the government’s commitment to implementing the tax breaks as soon as possible. But we hope that the delay will be a short one and shall now be doing everything that we can, working with UK government, the European Commission and TIGA, to get the state aid approval that we need as soon as possible. They absolutely will still happen.” There’s no word on what, exactly, has caused the hold up. One would certainly hope that the issue wasn’t that the the test wasn’t emphasizing UK culture in the game itself, enough.
The funding pot, going to all creative industries, not just game development, currently sits at £16 million, and the Chancellor revealed that a further £10 million would be made available over the next three years. At the same time, it was announced that there would be a further drop in corporation tax, surprise surprise. The current government is making a lot of initiatives to try and claw their way back up the economic ladder, many of which have a detrimental effect on British citizens, including next month’s appalling bedroom tax, which, as part of welfare reforms, will cut benefits from people who own a house which has a spare room. This tax does not take into account disabled people who require extra facilities, or parents who do not have full custody of their children and thus require a spare room for when their children visit. But hey, at least the government is taking care of the corporations.
Yeah, that last bit has bugger all to do with games, but I’m in a ranty mood and sometimes it seeps through.