Budget 2012: Tax breaks set to boost video game industry

by Nick Huber

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21 Mar 2012

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BRITAIN'S VIDEOGAME developers have welcomed today's decision by the government to give tax relief to the gaming industry.

In his Budget earlier on Wednesday Chancellor George Osborne announced corporation tax relief from April 2013 for the video games, animation and high-end television industries.

Although the tax relief is worth only a relatively small amount (£50m by 2014-15) compared to other types of tax relief, the announcement was welcomed as "terrific" news for the games development sector. The tax breaks are a similar idea to tax relief for the British film industry.

The announcement came on the same day as shares in Game Group, the video game retailer, were suspended and the company said it intended to appoint an administrator.

TIGA, the trade association representing the UK's games industry, which had campaigned for tax incentives for games development, said the new relief will will increase employment, innovation and investment in the UK video games industry.

Stephen Bristow an expert in film and TV tax at accountancy group RSM Tenon, said: "This is fantastic news for the creative industries and it's especially good to see the government putting its money where its mouth is."

The tax relief could generate least £350 million per year by encouraging more "high-end" TV production in the UK, as well as an overall boost of around £1bn to the UK economy, Bristow said.

Barry Murphy, tax partner at PwC, said: "For many years the games industry has asked to be recognised for the value it drives, in a manner similar to the film Industry. It looks like it's now game on with the Chancellor announcing tax breaks will extend to games, and some TV productions come back into the tax relief net too. This is good news for the British industry as it was under increasing competitive pressure from other countries offering lucrative credits."

As expected, the Treasury also said that it would introduce a consumption tax on remote gaming following a consultation

Gareth Martyn indirect tax director in PwC's betting and gaming team, said that the consumption tax on remote gaming will mean that duty is payable on all bets made by UK customers, irrespective of where the gambling business is located.

Many large online bookmakers and remote gaming businesses have recently moved offshore to benefit from the lower rates of duty and tax in locations such as Gibraltar and Alderney, Martyn said.

Introducing the tax may be tricky, he said. "The government faces a number of challenges ahead of the introduction of the duty to ensure that it can be effectively administered. A similar form of duty is already in place in some mainland Europe states but it is interesting to note that the introduction of a similar regime in Ireland has been delayed for over a year."

 

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