UK Government Confirms Gaming Tax Relief to Hinge on 'British' Test

The government unit in charge of applying corporation tax relief to the gaming industry confirmed it will propose a test to identify "culturally British" games, in order for companies to receive support.

Despite concerns from the wider industry that such a tight process could hinder a large number of businesses looking for tax relief, the Department for Culture, Media and Sport (DCMS) confirmed that all companies would be subject to State Aid approval from the European Commission (EC).

"We are now seeking views on a proposed cultural test that will identify culturally British video games, animation and high end television that might be considered eligible for the new tax relief," said the DCMS.

Currently, in Europe, state aid rules that with video games' tax relief, there must be a "cultural test".

For instance Activision's Call of Duty games, which is based on shooting people in WWII counts as "British cultural content," as well as Harry Potter console games because they are based on a book written by a British author.

Under the UK's assessment, the government will apply a test, with points awarded to games and productions giving them a "cultural value" score.

The tax breaks, set out in Chancellor George Osborne's budget statement last spring, are slated to be implemented from April 2013 and the closing date for responses to the DCMS consultation is 29 October this year.

Earlier this year Richard Wilson, CEO of UK games developers industry association Tiga, said many companies seeking the relief may run into a number of hurdles when it comes to a "science fiction game or an arcade or puzzle game with little narrative."

Wilson added that while some the most successful games have been created in the UK, Grand Theft Auto would find it hard to qualify for the tax relief because the setting, music, and synopsis is set in the US.

However, the DCMS believes the tax break and structure it will oversee will still be successful, reflective of similar measures applied to the film industry.

"[The] Government is committed to supporting these creative and dynamic sectors by introducing tax reliefs for these industries," said creative industries minister Ed Vaizey. "The film tax relief has been a huge success and I encourage all those with a vested interest in the animation, high-end television and video games industries to take part in this exercise, and make sure your views are known."

At present, film producers that qualify for tax relief, with a budget of £20m or less, can apply for a 25 percent rebate on certain expenditures.

Britain is now the sixth-largest games maker in the world after ranking as high as third only six years ago, according to Nesta research.

Meanwhile, a study from Tiga suggests that Games Tax Relief would generate and safeguard 4,661 direct and indirect jobs and £188m in investment expenditure by studios.

The research also says that it is estimated to increase the games development sector's contribution to UK GDP by £283m, and generate £172m in new and protected tax receipts for HM Treasury.