UK Cultural Tax Credit

TIGA, the trade association representing the UK games industry, today submitted detailed evidence to the Department of Culture, Media and Sport for the implementation of a cultural tax break for UK games production.

The report, Investing in the Future, proposes detailed and concrete plans for addressing the latest challenges to games development studios, while outlining an unprecedented case for the cultural value of video games.

The proposed Games Tax Relief would create 1,400 new jobs and trigger hundreds of millions of pounds in new investment by British studios who have shown new commitment to growth with a tax credit.

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.

The evidence was submitted to Sion Simon, MP and Minster for Creative Industries on Friday, 28 August 2009.

The evidence was produced by TIGA with assistance from Game Investor Consulting (specialist video game research company), Osborne Clarke (law firm), Grant Thornton (business and financial advisory firm), Tenon Group, Games Audit, Deloitte and a range of video game developers including, Kuju Entertainment, Ubisoft Reflections, Blitz Games Studios and Rebellion.

Richard Wilson, TIGA CEO stated: “The evidence presented today provides a robust argument for the introduction of a cultural tax break for games production, which will benefit both the UK games industry and also ultimately the wider economy, providing additional jobs, investment and UK tax revenues. We hope the Government will work to introduce TIGA’s proposed Games Tax Relief at the earliest opportunity.”

Lord Puttnam of Queensgate, Vice-Chairman of the All Party Parliamentary Group on the Computer and Video Games Industry, wrote a Foreword to TIGA’s report. He commented:

“For far too long the UK video games industry has been effectively ‘taken for granted’.

To ensure the continuing success of this pre-eminently creative sector, I can only urge the Government to support TIGA’s case for the introduction of a form of Games Tax Relief, as set out in this report.”

Ends