A new tax relief for video games companies to offset production costs is now effective as the government’s cultural regulations come into force
The new tax relief, which comes into effect from 19 August, is available for companies producing games that are certified as ‘culturally British’.
The cultural test means 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.
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 1 April.
Video games tax relief is based on the same model as 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.
The British Film Institute (BFI) has already received a number of applications that pass the cultural test and has started to issue the first certificates to developers.
Applicants 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.
Jo Twist, CEO of UK games industry trade association UKIE, said: ‘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.’
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.’
Research from trade body TIGA found that over five years the tax relief will create and protect 10,300 direct and indirect jobs and approximately £450m investment expenditure by UK studios.
The new corporation tax relief will provide around £35m of support per year to the sector, according to the Treasury.
There are currently around 500 games development studios in the UK, employing 9,000 staff. In 2013 sales of video games in the UK totalled £2.19bn.