Video game companies to be able to claim tax relief of up to 25 percent

Video game developers in the UK can claim tax relief of up to 25% on the production costs of a game that is developed in the UK, according to the Treasury.

The Video Game Tax Relief (VGTR) legislation came into force earlier this year on 1 April, and is available to game developers as long as their video games are ‘culturally British’, are intended for supply, and at least 25% of the production expenditure is incurred within the European Economic Area.

To be able to claim relief, developers will need to get the British Film Institute (BFI) to clear the games as culturally British. The intention of the proposed cultural tests is to ensure that only culturally-rich British video games can avail the aid. As a result of this scheme, the video games industry is estimated to save close to £35 million annually.

The scheme has been welcomed by video game trade bodies like UKIE and TIGA, who have campaigned for the last 7 years to bring such a tax relief to the UK video game industry.

It’s a long campaign, but we have finally got there, said the Richard Wilson, chief executive of TIGA, It’s a good measure that allows the UK games industry to compete on a more level playing field.

He added, The tax relief will unleash the financial and creative potential of the UK’s game businesses, benefit studios of all shapes and sizes and boost the production of culturally British video games. TIGA’s own research indicates that over five years the tax relief will create and protect 10,300 direct and indirect jobs and create and protect approximately £450 million investment expenditure by UK studios.

In the UK there are currently around 500 games development studios, employing over 9000 staff members. 95% of these studios are SMEs and have generated approximately £2.19 billion in sales in 2013. The introduction of such a tax relief means game studios will now have more money for development.