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 is competing
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 21st 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.
Price Waterhouse Coopers June 2011.