Video gaming companies set to claim tax relief on production costs

VIDEO games companies can now claim tax relief on their production costs, after new government regulations come into force.

The relief is only available for companies producing games that are certified as culturally British.

The cultural test ensures that the tax relief supports the production of culturally British games. Video games must achieve a level of points which they are awarded based on their cultural content, cultural contribution and the location of the game’s development and nationalities of key personnel working on the project.

The British Film Institute (BFI) has already received a number of applications that pass the cultural test. These include Dino Tribes by Blazing Griffin, MazeCraft by PW Studio, Beyond Flesh & Blood by Pixel Bomb Games, Mega Coin Squad by Big Pixel Studios and Spacepants by Boxface Games.

From today formal certificates for games that pass the cultural test can be issued by the BFI, which administers the cultural test process for the government, and the companies making these games can start claiming their tax relief against qualifying expenditure incurred since April 1.

Video games tax relief builds on the successful model of the film tax relief. Like the High-End TV and animation tax reliefs, development companies are eligible for a payable tax credit worth 25% of qualifying costs.

Around 95% of UK video games developers are SMEs. It is estimated that the new corporation tax relief will provide around £35m of support per year to the sector.

There are currently around 500 games development studios in the UK, employing around 9,000 people. In 2013 sales of video games in the UK totalled £2.19bn.

Financial Secretary to the Treasury, David Gauke, said: “The government is committed to supporting the creative industries, which make a valuable cultural and economic contribution to the UK. From today, companies will be able to really benefit from the tax relief we have introduced, enabling the UK to continue to be a world-class producer of video games.”

The government was keen to see the legislation introduced because it said it was acutely aware of the huge contribution that the creative industries make to the UK economy.

Minister for Culture and the Digital Economy, Ed Vaizey, said: “As part of our long term economic plan we are ensuring that the right conditions are in place to nurture industries like the video games sector, and these tax reliefs are pivotal in ensuring we can compete on a global stage. From Lego Star Wars to Moshi Monsters, our video games companies are already regarded as world leaders, and our ongoing support will ensure they continue to grow from strength to strength.”

Dr Jo Twist, CEO of Ukie, said: “It has taken years of hard work and dedication by many people in the industry and government to create the most innovative, inclusive, and future proof games tax relief scheme in the world at a time when it is most needed.

“We worked very closely with government to make sure this scheme benefits every type and size of developer, and that it recognises the importance of post-release production in games. This is a historical and exciting moment for our sector, and we will continue to work with our partners, such as the UKTI, to make sure we spread the word nationally and internationally.”

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