Trade body calls for stronger tax credits to support “disadvantaged” UK industry

Trade body TIGA is calling for stronger tax credit to support the UK games industry.

In a “landmark report,” TIGA said a 53% tax credit for games with budgets up to $32 million (£23.5m) would “help small studios scale up and grow.”

The new report, TIGA claims, demonstrates “the critical contribution of the sector to the UK economy” and sets out a “compelling case” for strengthening the Video Games Expenditure Credit (VGEC).

The Economic Impact Assessment of the UK Video Games Industry report – which was commissiond by TIGA and authored by Professor Homagni Choudhury, Professor Joe Cox, and Dr Alan Leonard of the University of Portsmouth — calls for urgent “reform if the industry is to compete on a level playing field with international rivals,” and suggests each of its proposals are self-financing, writing: “the additional tax revenues generated exceed the initial outlay required by HMRC.”

Whilst the report’s findings conclude the UK video game industry plays a vital role in contributing to the successes of the UK economy, supports more than 73,000 jobs, and supports regional economic growth across the UK, the industry is “at a disadvantage in competition for inward investment.”

The report also adds that many overseas jurisdictions provide more generous tax incentives for games production than the UK. For while the UK’s VGEC provides an effective rate of relief of 20.4%, France and Australia offer effective rates of relief of 30%, and Quebec 31.9%. Furthermore, as 78% of UK studios employ four or fewer staff, SMEs can struggle to access funding as start-ups have little evidence of financial track record, and commercial success can be “unpredictable.”

Consequently, TIGA is recommending the UK government consider introducing an independent games tax credit (IGTC) with a rate of 53% on 80% of qualifying costs for projects up to £23.5 million. It estimates this would boost Gross Valve Added (GVA) by £482 million and create almost 7000 jobs.

“The UK games development industry provides high skilled employment, supports regional economic growth and is export focused,” said Dr Richard Wilson OBE, CEO of TIGA. “Our sector is a success story with considerable potential. However, our industry is not competing on a level playing field and we are at a disadvantage in the competition for inward investment because our existing VGEC is not as generous as some of the tax incentives available in other jurisdictions. Additionally, many SME studios struggle to access finance to scale up and grow.”

Wilson continued: “The most effective way of driving growth in the UK video games industry is to enhance VGEC. VGEC reduces the cost of games development, which in turn encourages investment and the creation of high skilled jobs in the sector. Our new report shows that an IGTC could create 7000 jobs including 900 development roles, whilst generating tax revenues for HM Treasury. Strengthening VGEC will promote economic growth and ensure the UK remains a leader in games development.”

Earlier this year. TIGA responded to the spending review outlined by the UK Chancellor of the Exchequer, calling the government’s commitment to increasing funding for the creative industries as “encouraging.”