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European Commission Approves UK Games Tax Break
Published: 14th April 2014.
TIGA CEO Richard Wilson outlines the key info and immediate next steps for games businesses across the UK
When TIGA was founded in 2001 to represent the interests of UK developers, the vision was to create an organisation that could have a transformative effect on the UK videogame industry.
Today, that vision has become a reality. Since its inception TIGA has grown in size and scope to become a network for developers and digital publishers and the trade association for the UK videogame industry, with the achievement of games tax relief being our number one objective for the past seven years.
Games tax relief will be worth £188m in extra investment for UK games businesses between now and 2019 alone. It’s a tremendous victory for everyone at TIGA, our members and all those that have contributed to achieving our number one objective.
However, we must not rest on our laurels. At every turn TIGA pressed home the urgency with which GTR was needed, with many studios going out of business that might otherwise have survived. As such, we must treat the implementation of GTR with equal immediacy.
This is why we’ve put together the following topline guide to GTR to help you get started.
What period can I claim for?
GTR comes into effect for accounting periods from April 1st 2014. This will not be backdateable for April 1st 2013.
What businesses can claim GTR?
GTR only applies to companies registered in the UK – not LLPs or partnerships - and will operate in a similar manner to the existing UK film tax relief.
To be a video game development company, a company must be responsible for designing, producing and testing the video game; or directly negotiating, contracting and paying for rights, goods and services in relation to the video game.
What games are eligible?
For a game to qualify, it must have been intended as something to be supplied to the public when development started – you can’t ‘switch’ a tech project into becoming a game in order to claim GTR.
Games produced for advertising or gambling purposes are also ineligible for GTR.
What spend is eligible for GTR
Unlike TV production, there is no minimum spend for eligible projects.
All ‘core expenditure’ is eligible, this means any spend on designing, producing and developing a video game.
However, this does not include expenditure incurred in designing the initial concept for the video game or any expenditure incurred in debugging or carrying out maintenance on a ‘completed’ video game.
At least 25% of the core expenditure on the video game incurred by the company must be UK expenditure; which means game production expenditure on goods and services that are used or consumed in the UK. So if you’re making a game here, but outsourcing some elements of production to another country, your project can still be eligible for GTR.
At present, GTR does not cover ‘speculative expenditure’, where game projects are cancelled by publishers and not completed.
The Cultural Test
GTR should encourage the development of culturally British games. This is because individual projects must satisfy a cultural test in order to qualify.
The cultural test uses a points system, with a company having to obtain a certain minimum number of points to pass.
Points are awarded depending on the extent to which:
The game is set in the UK
How many of the in-game characters are from the UK
Whether the video game depicts a British story
How much of the original dialogue was recorded in English or a recognised UK regional language
The extent to which the game promotes UK culture
Whether significant production staff, such as a project leader, at least one scriptwriter, the lead composer, one of the lead actors, the lead programmer and the lead designer are citizens of, or normally reside in the UK.
How much can I claim back?
In simple terms, UK video game businesses can now claim back up to 25%, of 80% of the total costs of game production.
Following a successful claim for GTR, HMRC will pay back the amount in the form of a tax credit, which can be used to reduce a businesses corporation tax liability. Or if the game makes a loss, but is eligible for GTR and passed the cultural test, the company that made the game can claim a cash rebate from HMRC.
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To learn more about TIGA, please visit their website on www.tiga.org