Small Budget Games to Benefit From Games Tax Relief

TIGA, the trade association representing the games industry, welcomed the news that there would be no minimum spend threshold in order to benefit from Games Tax Relief. This will mean that small budget games, provided that they pass the cultural test, will be supported by Games Tax Relief. The 'games as a service' business model will also be able to benefit from the new Relief. TIGA made the comments following the publication of the draft legislation implementing Games Tax Relief.

The Government has decided that:

• Games Tax Relief will be modelled on Film Tax Relief
• There will be a single 25% tax relief on UK qualifying expenditure
• Games with some product placement or in-game advertising will be eligible for relief (but games whose primary purpose is gambling or advertising will be excluded)
• Companies must self-certify during the application process that a game does not contain pornographic or other extreme material
• The Government will allow all direct production expenditure to be eligible for relief in line with the existing treatment available under the film tax relief.
• Early stage expenditure incurred should be eligible for relief once a commercial decision to develop a complete game has been made. HMRC will provide guidance on the application of this principle in due course.
• The Government intends to allow all direct development expenditure (including relevant quality assurance) incurred after the release of a qualifying game to be eligible for relief, but to exclude all service maintenance costs.
• The Government agrees not to introduce a minimum spend threshold in order to keep the relief as simple as possible for users.

Dr Richard Wilson, TIGA CEO, said:

"This is excellent news for the video games industry. The Government has listened to our proposals and adopted the vast majority of our suggestions for the design of Games Tax Relief. TIGA is particularly pleased that there is no minimum spend threshold: this will enable start-up studios and small development businesses with smaller budget games to benefit from Games Tax Relief. Additionally, it is excellent that the Government has agreed to allow post-release development expenditure including QA costs to be eligible for Games Tax Relief. One of TIGA's key priorities has been to ensure that the new Games Tax Relief supports the 'games as a service' business model. The Government agrees. This is a good day for the UK games industry."

There was more positive news with the publication of the latest iteration of the cultural test which games will have to pass in order to be classified as culturally British games and so benefit from Games Tax Relief. The draft cultural test requires games to secure 16 points in order to qualify as culturally British games. Points will be awarded if:

• the game is set in the UK or another EEA state or in an undetermined location
• the video game depicts a British story or a story which relates to an EEA state
• the lead characters are from the UK, the EEA or from an undetermined location
• the English language is used in the game
• the video game promotes, develops or enhances British culture
• at least 50% of the work on conceptual development, layout and storyboarding, programming and visual design was carried out in the UK
• at least 50% of the work on performing and recording the music score created for the game, voice recording, audio production or picture production is carried out in the UK
• the project leader, scriptwriter, composer, artist, programmer, designer and one of the heads of department are qualifying persons, and if at least 50% of the development team are qualifying persons.