Richard Wilson, CEO of TIGA, the UK Video Games Trade Association, Explains Games Tax Relief
With the March budget looming on the 23rd, Dr. Richard Wilson, Chief Executive of TIGA, the trade association that represents the UK’s gaming industry, explains to Animation News the ins and outs of Games Tax Relief and R&D Tax Credit and why the coalition should implement the scheme.
Skwigly: Can you tell us a bit about what Games Tax Relief actually is?
Richard Wilson: Games Tax Relief is a unique tax break for the video games industry. In essence it would allow qualifying games companies to reduce their corporation tax bill. If they were making a loss in the year, games tax relief would actually enable them to receive money back from HMRC. So Games Tax Relief essentially reduces the cost of making games in the UK.
To qualify for Games Tax Relief there are a number criteria. The company would have to stick to a set budget; they would have be liable to pay UK corporation tax; and lastly they would have to pass a British cultural test. But in essence, what Games Tax Relief means is that companies will be able to make games or interactive products significantly more cheaply than is currently the case.
Skwigly: And what about R&D Tax Credits?
R&D Tax Credits are useful and non-sector specific, unlike Games Tax Relief, so a variety of different economic sectors can benefit from them. They help companies who are investing in classic R&D activities, making products or developing new ways to manufacture products. We propose that existing R&D Tax Credit be made much more generous and should allow more companies to benefit from them.
Skwigly: Why would Games Tax Relief be so beneficial, not just to the industry, but to the economy as a whole?
Games Tax Relief would help the UK video games industry because it would allow us to compete on a level playing field against our overseas competitors. Many of our competitors, Canada, USA, France and South Korea either have tax breaks for games production or other very generous levels of support. So the cost of doing games business the UK is comparatively high and we have been losing jobs and investment over the last four years.
So if we have Game Tax Relief it allows the UK gaming industry to compete for investment and in the battle to create jobs. Our research with the Games Investment Consulting shows that over five years if we have Games Tax Relief in place it would cost the Treasury around £194m but would bring in £394m. It certainly pays for itself and in that sense it’s good for the economy.
It will also create about another 3,600 additional games industry jobs and leads to another £431m in investment. But it doesn’t just help the video games industry and raise more money for the Treasury, it would also spawn a lot of indirect jobs because of the additional purchasing power coming from either new games companies setting up, or taking on new projects. Over five years Games Tax Relief would create in total 9,500 jobs, including the 3,600 jobs in the games industry. It is a real winner for the UK video games industry, but also for the economy.
Skwigly: Why do you think Gmes Tax Relief and Games Tax Credits have been over looked until now?
Well, I think we ran a very aggressive and successful campaign under the last administration, it was a hard struggle but we managed to get games tax relief into the March budget in 2010. The coalition overlooking it last year was a setback, but not a fatal one.
I think the reasons the government dropped it at that point in time was partly because they didn’t fully appreciate the value or importance of the UK video games industry. The second and much more important issue in my opinion is clearly the government was focused on trying to get the deficit down, so therefore they decided to put measure to promote growth on the backburner.
Skwigly: Would R&D Tax Credits only help the gaming industry, or would it have knock-on effects to other industries?
Obviously our main interest is the games industry, but I know the proposals we put forward would help a lot of other sectors as well like engineering, manufacturing and IT.
In terms of R&D Tax Credits in particular we’ve suggested that the level of qualifying relief should go up from 175 to 200 per cent. What that means in simple terms is for every £1 of qualifying expenditure you spend on R&D you get £2 back in terms of corporation tax reduction. So as you can see if we did have our measures in place it would be a real help to a lot games companies and indeed to other companies in the economy.
I should add, that a lot of animation businesses would benefit from what we’re proposing. It would be fairly easy to adjust Games Tax Relief to benefit animation companies. Of course, a number of animation companies also make games, so would benefit from the existence of Games Tax Relief.
Skwigly: Does Games Tax Relief apply to Mobile Phone app games?
The crucial point here is what the budget size would be. In principle there’s no reason why they wouldn’t benefit from Games Tax Relief. With regards to R&D Tax Credits it depends on what kind of new development or innovation they are adopting, so it would be quite hard to answer whether they’d benefit directly from our proposals with regards to mobile devices and app devices. In regards to Games Tax Relief, they would benefit provided their games were over a certain sized budget.
Skwigly: Could you persuade these other sectors to stand with you in lobbying the coalition?
I think that we do have a lot of sympathisers and supporters, I know for example Eskills, the Sector Skills Council for IT have supported games tax relief. We know people in the animation are sympathetic, and also people in the film industry are supportive of games tax relief too. We do have friends and supporters in other sectors too.
I was up in Edinburgh over the last couple of days where we launched the TIGA Scottish Manifesto to help the Scottish games industry. I was really pleased because the finance minister, John Swinney SNP turned up and made it quite clear he supported Games Tax Relief. The Scottish Government actually submitted a proposal to the Chancellor, George Osbourne, calling on him to introduce Games Tax Relief.