Eye of the Tiga
The tax breaks have been scrapped. But for a time developers, politicians and the trade organisation that did all the campaigning were optimistic that it would go ahead. This was written during that time...
On 24 March Alistair Darling announced this year’s Budget. And for the first time ever, in the UK, video games developers would benefit from a new system of tax breaks that would allow for £50 million of tax relief by 2012. For Britain’s games industry this was a major breakthrough as not only was the industry finally seen as a viable and real contributor to the economy but it came from two years of campaigning and lobbying from the trade association representing the UK's games industry, Tiga.
The campaign for video game tax breaks was backed by numerous politicians including Labour MP for West Bromwich East Tom Watson who says: “The industry has already made a huge cultural impact on the daily lives of millions of British citizens. It has stupendous growth potential but operates in an increasingly aggressive global market. Government should play a role in making sure that our creative talents get a level playing field.”
Studio manager at Realtime Worlds, whose game APB is just about to be released, Colin Macdonald is thankful that 
the government is seeing things in this new light: “It’s fantastic that politicians and government have finally realised what this industry is doing and more importantly have finally realised what this industry is capable of. I think it’s taken some of the huge public success stories to make them realise that this is actually a multi billion dollar industry.
“For the last 20 years we’ve had a great little games and digital media industry and it’s kind of been ignored so it’s just fantastic that it’s finally been recognised. And, obviously, to give us the best chance of success we need the government to give us at least some of what other governments are doing for the same industry around the world.
“It’s about taking the fantastic creative ingenuity that the UK is famous for and building on that making bigger games that are going to compete with some of the huge American, Canadian and Japanese blockbusters and having them coming out of the UK as there are relitivley few of them that do these days.”
Joint CEO of Team 17 Martyn Brown agrees: “The playing field hasn’t been massively equal for some time, with many countries and regions benefitting from tax breaks. I’m not holding my breath that the UK will receive them but to do so would mean that we’d have more opportunity to invest in highly risky new IP and R&D.
“We’re pretty prominent in the digital marketplace but we have no desire to be in the brutal retail marketplace working on super-risky, high budget titles. We’re a bigger fish in a smaller digital pond right now and we see that the digital marketplace will grow massively,” he added.
Canada always crops up in discussion about tax breaks due to its unrivalled tax relief system which has made the country one of the foremost video games developmental territories. For more information about how it works there read this.
As mentioned before Tiga is trade association representing the UK’s games industry. It has around 150 members consisting of games development studios, publishers, technology companies and around 20 universities. It works to raise the profile of the UK games industry by lobbying the government and parliament to create legislation that will provide a good background for the games industry to flourish and they develop benefits and services to help its members be more competitive.
Before the election Tiga was in touch with the Labour party and the Scottish National Party and they both made commitments in their manifestos for video game tax relief, especially the SNP which said it wanted to have a similar tax benefits as there are in other countries such as Canada. The Liberal Democrats and the Conservative Party didn’t mention tax relief in their manifestos but Ed Vaizey, who was the shadow Arts minister made a lot of promising comments about tax relief and then the Liberal Democrats came out with a public statement during their election campaign saying they’d back the games tax relief and introduce it if they came to power...
And then the general election took place and threw the country into disarray and set back the hopes of Tiga and the video games developers in the UK. 
So how do these tax breaks work and what benefits would they have for the developers and the country? It works in two ways. First if a developer’s game is profitable then they would receive a reduction in the amount of money they have to pay in corporation tax, varying from 20 to 30 percent depending on the size of the game’s budget. But if the developer’s game is making a loss, for example if the developer is just starting out is unable to get back those initial start up costs, then the tax breaks can be used to offset the amount of money they have to pay in corporation tax. And if things are really bad they can actually get money back from the treasury. How much exactly has yet to be decided.
The benefits to the industry go beyond this. Tiga estimates that over a five year period the tax breaks will create 3,500 graduate level jobs and lead to around £457 million of additional investment in the industry, which will in turn generate more money for the UK and will pay for itself over this time. However it’s not quite as simple as that and there are stipulations in order to apply for the tax breaks.
Dr Richard Wilson explains: “To benefit from the tax relief you have to pass a number of criteria. First you have to be eligible to pay UK corporation tax. Secondly you have to pass a cultural test, we proposed this because it’s the best way of getting it through the European Union. To pass this test you have to get 19 points out of 38 and you get points if your game reflects British or European heritage, whether it’s based on a book, film or television program, a historical event or a sport.
“You also get points if you’re game is original, as in it wasn’t a sequel. You get points if you employ a certain percentage of British staff and you get points if you’re using new technology. And the third criteria to see if you can benefit from tax relief depends on the size of the game’s budget. We argue that any game that costs more than £100,000 should benefit from tax relief.”
Of course now all of this seems pretty moot since the tax breaks were scrapped in the new Budget. You can read Dr Rchard Wilson's reaction to that in the news section.