Saving The UK Games Industry

Written by Ben Hardwidge

March 29, 2011 | 07:21

Tags: #britain #british #budget #interview #rd #richard-wilson #tax #tax-relief

Companies: #games #tiga #uk

Not Everyone Agrees With Tiga

As such, the whole R&D tax credits scheme is very far from the panacea that the UK games industry apparently needs. Wilson says his own calculations show that full games tax relief would result in about £194 million in rebates to the games sector over five years, compared with just £35 million from R&D tax credits in the same period.

That's not to say that R&D tax credits are a bad idea. Indeed, they were also a proposal put forward by TIGA, and Wilson welcomes Osborne's inclusion of them in his budget speech. The problem is that this is apparently nowhere near a large enough tax break to help UK game studios compete with those in countries with full games tax breaks, such as Canada.

'Take the province of Quebec,' says Wilson, 'if the government is intervening to the extent where it's paying almost two fifths of the salaries of game developers, then clearly the R&D tax proposals that have been announced just aren't sufficient to compensate for that level of competition on tax. So the R&D tax measures that were announced in the budget, and which we campaigned for, are good news. Do they allow us to compete on a level playing field? Absolutely not.'

*Saving The UK Games Industry Not Everyone Agrees With Tiga
Tiga CEO Dr Richard Wilson says the government's proposed R&D tax credits scheme won't be enough to enable the UK to compete with countries such as Canada

Of course, the games industry wasn't the only area affected by the coalition government's first budget. The cuts have reached far and wide, and you could rightly ask why the games industry deserves tax breaks when so many other industries won't get them.

Wilson points out that 'there are actually a huge number of tax credits existing in the UK economy – 1,042 to be exact – not all of those are sector-specific, but there are a huge number of tax credit systems in the UK economy. There's a sector-specific tax break for the film industry, and the UK government supports that with great enthusiasm. There are also capital allowances, which really in effect are sector-specific tax breaks for the manufacturing sector, so there are other tax breaks that help specific industries. The government intervenes all the time to provide sector-specific support, or introduce tax relief to promote particular causes, sometimes for cultural and social reasons as well as industrial reasons.'

This is true – there are plenty of other industry sectors that get tax breaks, but why does the games industry specifically deserve one? 'Because we're competing on an uneven playing field,' says Wilson. 'Canada, parts of the US, France and other countries have tax breaks for game production – we don't, and that's putting us at a competitive disadvantage, so we're losing jobs and we're losing investment.

'We're not asking for special treatment, we're asking for fair play, and it makes sense from the government's point of view, because all the evidence from TIGA's research, and experience from overseas, demonstrates that tax break against games production leads to more revenue for the government, more jobs being created and more investment taking place, so really it's win win.'

Not everyone in the UK games business is asking for tax breaks, though. Financial incentives are important for big publishers looking for competitive game studios to produce their games, but they're not necessarily such a big deal for an independent developer doing its own thing.

*Saving The UK Games Industry Not Everyone Agrees With Tiga
Cliff Harris from Positech, developer of Gratuitous Space Battles, is more in favour of dropping corporation tax than introducing games tax relief

One example is Positech, developer of Gratuitous Space Battles. Positech is a one-man operation headed by Cliff Harris, and he cares little for the proposed tax relief plans. It's not the ethics of tax relief that's an issue for Harris, but more the bureaucracy that surrounds it. This is fine for large companies who employ a dedicated accounts team, but it could potentially become a big hassle for smaller developers, consuming valuable working hours.

On his blog (which we can't link to at the moment, because the Positech site has recently been hacked), Harris said that the process of claiming tax relief would probably involve him 'travelling, then debating and arguing, and hoping that some stuffy civil servant in a suit doesn't assume I’m some dodgy shyster just because I wear jeans and work from home.'

Harris is much more in favour of ideas such as the government's 1 per cent reduction on corporation tax in the last budget. This 'just makes Positech Games one per cent more competitive automatically,' he says, 'without any effort involved by anyone. It’s the smarter move.' Clearly there isn't an industry-wide consensus on the issue.
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