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'We're headed for the top table': UKIE's Jo Twist talks EC's green light for Games Tax Relief

'We're headed for the top table': UKIE's Jo Twist talks EC's green light for Games Tax Relief

I was three months into this job when the Chancellor of the Exchequer, George Osborne, made the announcement in his 2012 Budget that games, what they call "high-end drama" (which means pretty expensive – think Downton Abbey), and animation would be given the same tax reliefs that the British film industry has benefited from for more than a decade.

This fantastic news was long awaited, and came weeks after the UK Government also made the decision to reform the school curriculum to remove ICT and replace it with computer science after listening to the strong arguments put forward by the collective Next Gen Skills campaign, led by Ian Livingstone and funded by our members.

This seemed all too good to be true. But it was really happening – however, there was one more level to be completed before our industry could see the actual introduction of the tax credit.

A level called State Aid approval. If someone were to make a game out of this, I would play it because it is part puzzle adventure and part hidden object.

Evidence

Because we are a member of the EU, tax relief can only be granted in member states if it is on the basis of addressing a market failure in the making of culturally distinctive products or on research and development grounds. We already have a R&D tax credit scheme in place.

With animation and high end drama being so similar to film, the European Commission waved the schemes through. With games, it was a different matter. It wanted some more evidence and answers to detailed questions it had.

On the one hand the EC noted that we punch above our weight in many ways. We have global successes made here in the UK such as Grand Theft Auto and the LEGO games. We consistently beat film and music box office and album sales records.

However, those great examples are few and far between, and we had to work collectively as an industry to give the best evidence based case to them that there was a clear market failure in the development of British or European flavoured games being made on UK soil by people who are either British, or who have chosen to make the UK their home.

Grand Theft Auto was cited as evidence of UK's strength

Our quest for answers took us up and down the country, speaking to hundreds of people in the industry – paying extra attention to microstudios – about what their needs were, how they would like to see the scheme work, and why they needed this help so they could take a financial risk on games, especially as so many of them were and are trying to balance work for hire with the development of their own IP.

Getting cultural

It was especially interesting to look closely at where the market failure was in mobile and tablet games.

Based on feedback from companies big and small, independent and publisher owned, we made some strong recommendations to Government about how the games industry, with its diversity of budgets, company size, company structure, business models, and platforms, needed some unique features to be included in the scheme.

For instance, in France - where a tax credit for games already exists - there is a minimum budget threshold you have to satisfy before you can apply for the credit. The minimum budget at the moment is €150,000. We argued that many mobile developers in particular, with low overheads, often have much more modest budgets than that.

We also argued that the cultural test, which games must pass to qualify, should recognise that some games, especially mobile games, are set in locations with characters that cannot be determined as being human, but yet are definitely British or European in concept and the way they act.

We used Super Hexagon as an example. When this game was run through the draft cultural test, the BFI (who administer the test) said it would pass.

Super Hexagon would pass the cultural test

We also said that, particularly in the mobile space, but obviously across platforms, games are never "complete" as such.

We pushed for the ability for games businesses to claim for ongoing development (ie iterations of games and DLC). This is unique to any tax credit scheme, we believe.

Next steps

We have big strategic plans for the next two years, beyond this important day. The world’s eyes will be truly on us as a sector now, and investors and others will have more cause to sit up and pay attention.

This is only the start, and we will be there every step of the way as our sector confidently takes its rightful place once more at the top of the global leader board for development.

Make sure you book your place at one of our roadshow briefing sessions to find out how you can get your mitts on the tax credit.

Jo Twist is CEO of UKIE, the association for UK interactive entertainment.

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