Games Tax Relief

TIGA targets tax incentives to position UK Games Industry at the leading edge

TIGA, the trade association supporting the UK Games Industry, has launched its manifesto in readiness of the incoming governing party – whoever that may be from 6 May 2010?

Key proposals include (in my preferred order):

  1. Introduce a Games Tax Relief “as soon as possible” – we know it should be coming as it was announced in the recent Budget yet the exact details have yet to be revealed. The key point here is that other competing countries such as Canada, Australia. China, France and South Korea already receive support – we cannot allow this to drag on without concrete detailed proposals and an imminent timetable for its introduction. TIGA suggest that the relief should apply to any company subject to UK corporation tax so long as certain cultural tests are satisfied. They go on to suggest a series of tiered reliefs dependent on spend incurred in development of the games and the entitlement to a tax credit for qualifying companies. My concern is that efforts to make this as targeted as possible actually result in a more complex and burdensome regime that does not reach those UK gaming businesses that need it. I wonder whether a tax holiday system may be easier to implement?
  2. Increase the enhanced R&D Tax Credit to 200% (from 175%) for SMEs (Small and Medium Sized entities – basically those with less than 500 employees). I think this is right.
  3. Introduce the (lower 10% corporation tax) patent income regime as soon as possible. Like the Gaming Tax breaks, we know this incentive for patent income is on its way, TIGA quite rightly call for it to be introduced in 2012 rather than 2013 as currently proposed. The Netherlands have this now – why do we need to spend years consulting with businesses on this issue?
  4. Increasing the value of corporation tax losses – allow for corporation tax losses to be carried back 3 years to offset against previous years’ taxable profits rather than the current 1 year. There has been a temporary measure to allow a 3 year carry back but this extension has been limited to £50,000 of losses. I think this is a sensible proposal that would return us to the position we were in some 10 or so years ago.
  5. Extend the scope of Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) tax enhanced investing to include those businesses that fund rather than actually create intellectual property (IP). Given that IP will become increasingly valuable going forward, this makes sense.

Given that the UK Games sector contributed approximately £1 billion to the UK’s GDP and £400m in taxes to the Exchequer  in 2009, the Government should sit up, listen and take action.

You can download a copy of the TIGA manifesto here. Please leave your comments and thoughts.