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Tax relief for UK developers cancelled

Tax relief for UK developers cancelled

Chancellor George Osbourne has cut planned tax relief for games developers in the UK today.

Chancellor of the Exchequer George Osbourne has announced as part of the new budget that the Conservative and Liberal Democrat coalition government will cut plans to give UK game developers tax relief.

The announcement was part of the new 2010 budget speech in which Osbourne only said that the "planned tax relief for the videogames industry will be cancelled."

The promises for tax relief were made under the previous, Labour government and has been cut as the new Conservative and Lib Dem coalition seeks to reduce national debt.

Other budget highlights revealed so far include a two-year pay freeze for public sector employees who earn more than £21,000 GBP and a rise in VAT to 20 percent that will start in January.

Parts of the new budget were not met well by listeners and Osbourne was forced to explain that action was "unavoidable" given Labour's "years of spending and debt".

On the plus side, the new budget gives aid to new businesses setup outside of London, with some new companies set to qualify for an exemption from NI contributions for the first ten employees. It's hoped this move will help smaller developers to establish themselves more quickly.

Let us know your thoughts on the budget in the forums.

36 Comments

Discuss in the forums Reply
Isitari 22nd June 2010, 14:09 Quote
'Parts of the new budget were not met well by listeners and Osbourne was forced to explain that action was "unavoidable" over a booing crowd.'

What a crowd....sorry I know the Palace of Westminster can get rowdy but calling them a crowd?!

Also my School has just had an emergency union meeting over the 2 year pay freeze.....it could get interesting around here ;).
Jezcentral 22nd June 2010, 14:13 Quote
Dammmit. When times were good, we could have done what Canada did, and invest in getting the games devs to come over. Now we can't afford to do that. Bloody Brown. :(
CardJoe 22nd June 2010, 14:14 Quote
Quote:
Originally Posted by Isitari
'Parts of the new budget were not met well by listeners and Osbourne was forced to explain that action was "unavoidable" over a booing crowd.'

What a crowd....sorry I know the Palace of Westminster can get rowdy but calling them a crowd?!

Personally, I'd describe them as a rabble...but fine, that line has been tweaked to give more elucidation.
julianmartin 22nd June 2010, 14:28 Quote
This doesn't come as much of a surprise to me. There aren't many reasons that can justify why the games industry deserves a tax break over any other, given they do not provide essential services to our economy or quality of life.

It is a shame for the developers, sure, but did anyone really expect anything else?
pimlicosound 22nd June 2010, 15:07 Quote
Quote:
Originally Posted by julianmartin
...given they do not provide essential services to our ... quality of life.

You can speak for yourself!
Coldon 22nd June 2010, 15:10 Quote
a modern AAA game project can cost several million dollars, that is money coming into the community from external source and boosting the local economy. The money being paid to staff and maintenance costs gets put straight back into the community.

It is no surprise why in the US, states are fighting with each other as to who can offer the biggest tax rebates and incentives for game studios to open up shop there. Hell Savannah, Georgia offers free office space for game studios.

The UK is one of the worst potential areas to open a game studio, the salaries for devs are nearly half those of their US counterparts, the cost of living is much higher and there are absolutely no financial incentives offered by the state.

The game industry is tiny and in the bigger picture, perhaps the government has more urgent matters to resolve at the moment but hopefully in the future they will realize that by not offering those incentives they will lose out the economic benefit to other EU and eastern bloc countries. These incentives dont only apply to the game industry but any entertainment industry.

For example Bulgaria has now become the premiere action movie location, why? Cause its cheap to work there, as of yet the government doesnt offer any incentives but there are serious calls for a 30% tax rebate for the film industry. As it stands it is the choice location for actions movies, adding in a tax cut will only further increase the popularity and get a lot more foreign money into the country's economy.

A good article on the topic can be found here, http://sofiaecho.com/2010/05/14/900295_the-stuff-that-dreams-are-made-of & http://www.facebook.com/pages/Supporters-of-the-Bulgarian-Movie-Production-Tax-Incentive-Law/143839733409?v=info.

Now i know that is going off topic but the same principles apply to the game dev industry and it influence on the local economy. Gaming is a multi-BILLION $ industry and not wanting to get a piece of the pie is a a bit narrow minded.
CardJoe 22nd June 2010, 15:11 Quote
Quote:
Originally Posted by julianmartin
This doesn't come as much of a surprise to me. There aren't many reasons that can justify why the games industry deserves a tax break over any other, given they do not provide essential services to our economy or quality of life.

It is a shame for the developers, sure, but did anyone really expect anything else?

True, but the film industry gets great tax breaks and is now a much, much smaller, less profitable business which employees fewer people. The UK has a legacy of great developers, but it needs to compete with countries that do provide tax breaks (France, Germany, USA, Canada) in order to stay a viable base for developers and publishers.
Jamie 22nd June 2010, 15:20 Quote
Where are the tax breaks for web developers?
NuTech 22nd June 2010, 15:36 Quote
This is pretty much the last nail in the coffin for any new UK game development. I'm sure existing and indie studios will manage to survive, but you can forget about future AAA houses setting up shop here.

When you have so many countries offering incredible local talent (just look at eastern Europe, their games may still be slightly unpolished but they're making incredible strides), tax breaks and other incentives - you have to ask, why bother open a studio in the UK?

Tax breaks aren't only for companies that provide 'essential' services, they're also used to encourage and help nurture rapidly growing industries. As a country that has all but abandoned the industrial sector and possesses very few natural resources, we need to gain recognition for more than just being a financial capital of the world. The video game industry is a perfect match for the UK, but I don't think the government appreciates that.
julianmartin 22nd June 2010, 15:56 Quote
Plenty of good points made, and I pretty much agree with all of them, but I fear they are all too speculative to really get taken seriously by the government, considering the kind of money it is trying to save (and because it has to, not because there is a choice).

One could equally say farming needs more tax breaks (even though it has many already), to stop our reliance on imports (and even export and re-import just to package our products!). But again, it is too speculative to hope the industry will improve that much because of it.

Giving tax breaks is like investing into a certain industry. The UK government is in no real position to be doing that right now, even if it is the best idea in the world. The gains from doing it may not be seen for many years to come, and there are other areas which will give more immediate, clear returns, required for economic recovery.

I say all this, it doesn't matter anyway, there IS going to be another recession anyway. The double dip is coming. You've all been warned. :D
Coldon 22nd June 2010, 16:01 Quote
Quote:
Originally Posted by Jamie
Where are the tax breaks for web developers?

Web developers are much much smaller outfits and often don't come close to the revenue of the game or film industry. Even a poor selling AAA game only selling 100 000 copies, will bring in around $40 million dollars. I dont think there is a single web developer that can compete revenue wise with a AAA game studio.
Quote:
Originally Posted by NuTech
This is pretty much the last nail in the coffin for any new UK game development. I'm sure existing and indie studios will manage to survive, but you can forget about future AAA houses setting up shop here.

When you have so many countries offering incredible local talent (just look at eastern Europe, their games may still be slightly unpolished but they're making incredible strides), tax breaks and other incentives - you have to ask, why bother open a studio in the UK?

Tax breaks aren't only for companies that provide 'essential' services, they're also used to encourage and help nurture rapidly growing industries. As a country that has all but abandoned the industrial sector and possesses very few natural resources, we need to gain recognition for more than just being a financial capital of the world. The video game industry is a perfect match for the UK, but I don't think the government appreciates that.

Looking at the annual GDMAG salary survey the average salary for a game programmer in the UK is around $45 000 compared to the $75 000 in the US, take into account the high cost of living in the UK the salary difference becomes a lot larger. The take into account the lack of any incentives for companies, like nutech said its the last nail in the coffin.

Eastern europe is taking over, the ukraine producing the stalker series, masthead in bulgaria working on fallout online, the witcher coming out of poland, the ARMA series from czechoslovakia. To be honest off the top of my head I cant think of a single AAA game developed in the UK. All the big studios have closed down their UK studios and all thats left is handheld developers.

Just for reference some the incentives offered worldwide for game dev studios:

new mexico - 25% tax rebate
texas - 5% cash back on all spending in texas
ontario - 40% cash back
georgia - 20% tax credit
conneticut - 30%
etc...

the us and canada are really pushing to get more game dev studios opened.
CardJoe 22nd June 2010, 16:15 Quote
Quote:
Originally Posted by Coldon
To be honest off the top of my head I cant think of a single AAA game developed in the UK. All the big studios have closed down their UK studios and all thats left is handheld developers.

Big ones? Recent ones? Off the top of my head?

Aliens versus Predator (Oxford, Rebellion Development)
Total War series (Horsham, Creative Assembly)
Blur & Project Gotham (Liverpool, Bizarre Creations)
Batman: Arkham Asylum (Newcastle, Rocksteady)
APB (Dundee, Realtime Worlds)
Grand Theft Auto series (Edinburgh, Rockstar North)
Banjo Kazoee (Reading, Rare)
Burnout series (Guildford, Criteron)
Fable series (Guildford, Lionhead)
Dawinia, Uplink, etc (Can't remember, Introversion)
Buzz! series (Brighton, Relentless)
Wipeout series (Liverpool, Sony SCE Liverpool Studio)
Brink (London, Splash Damage)

There are a few, in short - and only one of the above is a handheld developer (Relentless). There's even more if you look at older games - Elite, Lemmings, Tomb Raider, Syndicate, Theme Hospital, etc, all Made in the UK.

It all only gets thorny when you look at ownership. Many of the above are owned by Microsoft, EA, Activision or 2K - all of whom are US companies. Or Sony or Square Enix, who are Japanese. The real problem is that there are no publishers left in the UK, not a shortage of developers. We're making money for other countries, essentially.

More info: http://www.bit-tech.net/tag/made-in-the-uk
eddtox 22nd June 2010, 16:15 Quote
Shock, horror, the ConDems are cutting things!
Coldon 22nd June 2010, 16:23 Quote
Quote:
Originally Posted by CardJoe
Big ones? Recent ones? Off the top of my head?

Aliens versus Predator (Oxford, Rebellion Development)
Total War series (Horsham, Creative Assembly)
Blur & Project Gotham (Liverpool, Bizarre Creations)
Batman: Arkham Asylum (Newcastle, Rocksteady)
APB (Dundee, Realtime Worlds)
Grand Theft Auto series (Edinburgh, Rockstar North)
Banjo Kazoee (Reading, Rare)
Burnout series (Guildford, Criteron)
Fable series (Guildford, Lionhead)
Dawinia, Uplink, etc (Can't remember, Introversion)
Buzz! series (Brighton, Relentless)
Wipeout series (Liverpool, Sony SCE Liverpool Studio)
Brink (London, Splash Damage)

There are a few, in short - and only one of the above is a handheld developer (Relentless). There's even more if you look at older games - Elite, Lemmings, Tomb Raider, Syndicate, Theme Hospital, etc, all Made in the UK.

More info: http://www.bit-tech.net/tag/made-in-the-uk

Sorry I meant made in the last year or so... So its a lot better than I initially thought but still doesn't look good a lot of the major studio have closed shop and moved UK IPs over to other studios. I completely forgot about the scottish studios... oops!!

my point was its looking a little bleak, i for one hopes that it only gets better but money talks and it makes more sense for publishers to open a big studio somewhere where they will get 30% off their taxes.
NuTech 22nd June 2010, 16:28 Quote
Quote:
Originally Posted by Coldon
Eastern europe is taking over, the ukraine producing the stalker series, masthead in bulgaria working on fallout online, the witcher coming out of poland, the ARMA series from czechoslovakia. To be honest off the top of my head I cant think of a single AAA game developed in the UK. All the big studios have closed down their UK studios and all thats left is handheld developers.
As soon as eastern European studios figure out how to make their games appear more 'western' (which they're already doing a good job of with games like Metro 2033) and are able to afford more dev kits, they will take a huge market share. When it comes to talented and cheap developers, they're second to none - currently only lacking in pedigree and resources (both solvable problems).

There are still quite a few AAA studios in the UK, including major racing game developers like Bizarre Creations and Black Rock Studio. Part of Take2 is still in England, but they mostly focus on mobile and handheld. Scotland has Real Time Wolds (creators of Crackdown) but they're most likely going to go under (or at least have major layoffs) because APB is a turkey. Then there's Rebellion (but they haven't had a major hit in a while).

Those are just a few off the top of my head, but my actual point was that I just can't imagine new studios being created. If I was a publisher thinking off opening a studio, I just don't see a reason to pick the UK (and this is coming from a guy who works for a huge publisher, albeit in a completely different department).
CardJoe 22nd June 2010, 16:31 Quote
Quote:
Originally Posted by Coldon

Sorry I meant made in the last year or so... So its a lot better than I initially thought but still doesn't look good a lot of the major studio have closed shop and moved UK IPs over to other studios.

Well, bear in mind it can take a long time to develop a AAA game - much longer than a year for most studios. The ones above who haven't released a game in the last twelve months (such as, say, Lionhead whose last game was Fable 2 in 2008) are actively working on new titles (Lionhead is working both on Fable 3 and Milo for Kinect). None of the studios listed above are either small, unsuccessful or dormant (apart from maybe Introversion, who are tiny but well-known).
Coldon 22nd June 2010, 16:35 Quote
i really hope the situation stays as is or improves.
DriftCarl 22nd June 2010, 17:47 Quote
As much as we dont like the increases in tax and the cuts in spending. It is something that the government has no choice of. The only choice they have is to decide on where the increases and cuts go.
This still goes back to labour and to a lesser extent the banks.
We dont want our childrens children to be in a huge debt country in the future, we all have to dig deep, save where we can and make improvements in the way we spend.
I work for a company that has alot of government/education related contracts, instead of complaining about how the cuts in spending are hurting our profits, we are thinking of new ways to get business from these councils, while also saving them money, sure someone will lose out as our competitors will lose the business, but the most important thing for me is to keep in work :)
LightningPete 22nd June 2010, 18:21 Quote
Quote:
Originally Posted by CardJoe
Quote:
Originally Posted by Isitari
'Parts of the new budget were not met well by listeners and Osbourne was forced to explain that action was "unavoidable" over a booing crowd.'

What a crowd....sorry I know the Palace of Westminster can get rowdy but calling them a crowd?!

Personally, I'd describe them as a rabble...but fine, that line has been tweaked to give more elucidation.

I'd call parliament a giant nursery for cry babies who just make loud moans after a phrase is said.
GravitySmacked 22nd June 2010, 20:30 Quote
That's a shame for the developers; it was a breath of fresh air when they announced the tax breaks.

Saying that on a purely selfish note the budget wasn't half as bad, for me and my family, as I had feared.
TWeaK 22nd June 2010, 21:11 Quote
I caught it live just before I went out, and I could've sworn what he said was '..and the poorly targeted tax breaks for the gaming industry will be cancelled'.

Now, I never really expected it to go through (since when has a UK government shown any not-so-common-sense?) but calling it poorly targeted? Osbourne really needs to get his head screwed on straight for that one.
lewchenko 22nd June 2010, 22:00 Quote
Well atleast Corporation Tax is being reduced 1% each year for 4 years. That has to count for something for these companies.

Whilst I dont agree they should be given special treatment, I do believe the UK has to be seen to be competitive in order to entice talent. Just look how the Europeans built CERN and spent billions in research and development grants to entice the best physicists from the US etc to work in Geneva. It worked a treat.. we could learn something there!
John_T 22nd June 2010, 22:50 Quote
Quote:
Originally Posted by lewchenko
Just look how the Europeans built CERN and spent billions in research and development grants to entice the best physicists from the US etc to work in Geneva. It worked a treat.. we could learn something there!

CERN is a pan-European project, 20 countries are funding it - with us being the third highest contributors paying almost 15% of the budget. So we are paying our fair share there...


With regard to the budget and how it affects the gaming industry in particular, or course it's sad to see planned (but not actual) tax relief for certain industries get dropped, but with a £900b+ debt rising at something like £10,000 per second, I think cutting back pipeline projects was always going to be an easy hit.

Remember too that a number of promises would have been made by the outgoing party knowing full well they were unaffordable and would get dropped - thus they can make cheap party-political gain out of it. The so-called 'poison-pill' strategy. Very grown-up politics.

As julianmartin and others mentioned, I think every single solitary industry can come up with reasons for why it is a particularly special case needing special help, that doesn't make it so. Also, a fair few European countries are in a worse situation than us, (and the US has an accelerating debt that makes ours look small fry) so while those countries may offer better incentives in certain areas (at present) we'll no doubt be trumping them somewhere else.

As for Osbourne maybe not being terribly polite about the gaming industry, well, to be fair, I think he had rather bigger things on his mind: What with all the hundreds of thousands of government employees about to be thrown out of work, the promise of mass strikes and civil unrest, and him personally likely to become the most hated man in the country...

The joys of 13 years of spending more than you earn, it finally has to be paid back. With interest.
digitaldave 22nd June 2010, 22:54 Quote
Quote:
Originally Posted by Coldon
Quote:
Originally Posted by Jamie
Where are the tax breaks for web developers?

Web developers are much much smaller outfits and often don't come close to the revenue of the game or film industry. Even a poor selling AAA game only selling 100 000 copies, will bring in around $40 million dollars. I dont think there is a single web developer that can compete revenue wise with a AAA game studio.

but I know of several web development companies who employ more british workers than the larger game developers.

we need jobs, more tax payers, not a small group of people with a turnover of 80 million squillion etc.
John_T 22nd June 2010, 22:55 Quote
By the way, people discussing what parliament should be called: A crowd, a rabble, a giant nursery etc. I've always favoured 'nest of vipers' myself...
robots 23rd June 2010, 01:13 Quote
It would have been really nice. It was a good, forward thinking plan, which is something Britain could use more of. The games industry is enormous, big business, and could have earned back everything that was put in and much more.

I am disappointed that they cut this, but I can't really blame them. It seems that this is the 'get us out of serious crap' budget, so it can't really be helped. Maybe if/when we are back on track someday, they can look in to this kind of thing again.
AshT 23rd June 2010, 07:34 Quote
No surprise the tax break got shelved. In all though the Budget announcement was sweeping, full of cuts and savings, and much less damaging as it could have been. I was pleasantly surprised.

This pic always sticks in my mind when I think of UK politics ...

http://farm4.static.flickr.com/3594/3629166642_f55f3ec544.jpg

Saying that, actually I think the apes are far better behaved than our politicians!
EdwardTeach 23rd June 2010, 16:47 Quote
Short sited in my opinion. I am heavily in favour of the budget in general, in fact I don't think they have gone far enough in terms of slashing welfare. However, cutting a few industries a break at the moment would not mean much of a loss in revenue, but in the long term will massively help our economy. Outside of gaming other industries like biotech really need this help at the moment.
frontline 23rd June 2010, 19:34 Quote
Slashing welfare - a complete fallacy, successive governments have tried to tackle it and it never happens. Because they offer no alternative.

Try taking a trip up north to the old mining communities, manufacturing heartlands etc and show the benefit claimaints where the jobs are. London and the South East is a complete bubble that might as well be another country at the present time.

The only thought that came into my mind when the budget was announced was that i need to try and spend less next year (especially after a wage freeze already this year). Will that help the economy if i spend less?
robots 23rd June 2010, 21:49 Quote
Yea. I think the average single person on the dole isn't that big a problem. The biggest problem is all the no life teenage girls who get pregnant on purpose and then mass produce several kids and get a big bunch of money for each kid. So the girl herself gets 40 quid a week or whatever, and the boyfriend too probably, and then another 40 quid or so for each kid. Times 6 or 7 kids that's over £300 a week, and then they get housing allowance too and god knows whatever else. Multiply that by their entire lives, seeing as the lazy hopeless buggers never work a day, that's a lot of money.
Aragon Speed 24th June 2010, 07:17 Quote
"The promises for tax relief were made under the previous, Labour government and has been cut as the new Conservative and Lib Dem coalition seeks to reduce national debt. "

If the games industry removes itself to another country completely, exactly how much tax will we get out of it to reduce the national debt then?!?
eddtox 24th June 2010, 10:40 Quote
Quote:
Originally Posted by robots
Yea. I think the average single person on the dole isn't that big a problem. The biggest problem is all the no life teenage girls who get pregnant on purpose and then mass produce several kids and get a big bunch of money for each kid. So the girl herself gets 40 quid a week or whatever, and the boyfriend too probably, and then another 40 quid or so for each kid. Times 6 or 7 kids that's over £300 a week, and then they get housing allowance too and god knows whatever else. Multiply that by their entire lives, seeing as the lazy hopeless buggers never work a day, that's a lot of money.

One could argue that if a teenager does that, there have already been monumental failures in their upbringing, both by their parents and by society in general.

The problem is not society providing support for those less fortunate, the problem is unscrupulous people abusing the system. The power to solve that problem lies largely in the hand of parents and the wider community, and the first step is (and always will be) education.

The flip side of that is the way public perception has been manipulated to the point that when one thinks of welfare, scroungers is the first thing that comes to mind. This perception does a lot more harm to those who are, for whatever reasons, in genuine need of social support, than to those who abuse the system and simply don't care.

Finally, on the issue of 'lazy hopeless buggers never work[ing] a day' their entire lives, that is another commonly held assumption that I suspect is not true of every single claimant. However, once again, it falls to society to support and encourage people who want to get back to work, rather than penalise them.

Anyway, all I meant to say in this post is that we should occasionally try to look past our stereotypes and see what things are really like.
Coldon 24th June 2010, 11:10 Quote
Quote:
Originally Posted by digitaldave
but I know of several web development companies who employ more british workers than the larger game developers.

we need jobs, more tax payers, not a small group of people with a turnover of 80 million squillion etc.

I'm not too sure how exactly the tax system works in the UK, but a large chunk tax is payed on the turnover, so a company with 200 employees and a turnover of $1 million is less beneficial to the state that a company with 100 employees and a turnover of $20 million. Then again I don't know where the publishing house needs to pay tax? I'm assuming the UK branch will probably have to pay the UK state tax for every game sold.
robots 25th June 2010, 04:04 Quote
Quote:
Originally Posted by eddtox
One could argue that if a teenager does that, there have already been monumental failures in their upbringing, both by their parents and by society in general.

The problem is not society providing support for those less fortunate, the problem is unscrupulous people abusing the system.
Both of those things are true. Sadly, the stereotypes are often true though too. Like I said, not every benefit claimant is a problem. I claimed it once as have most of my friends when they have been out of work. But for most people it's a temporary thing, for some people it's a way of life.
NuTech 25th June 2010, 08:14 Quote
Okay, now this is getting just plain weird.

Develop is reporting that a major publisher intentionally sabotaged the government's plans for tax breaks.

According to the report, the unnamed publisher felt it would give the UK an unfair advantage over other nations and secretly lobbied the government to scrap all plans.

Kotaku thinks, via process of elimination, it could only be Activision or EA.
Coldon 25th June 2010, 08:44 Quote
I don't understand what they hope to gain by killing the tax break?! apart from killing the local industry. Tax breaks benefit them as well as other and so what if it gives it an unfair advantage, that's the whole point of the tax break.

I think develop is just spreading a rumor. How exactly would you lobby that: "so um yeh, these new plans would give the UK a huge advantage and well that's just not fair play old boy, pip pip huzah"??!?!?!
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