The Edinburgh-based company has received £42 million ($51.4 million) in video games tax credit by the government, equating to 19 per cent of all tax claims in UK video game industry. This is despite having made billions for its parent company, Take-Two Interactive.
Grand Theft Auto V made $800 million within the first 24 hours of release, generating $6 billion since launching in 2013. This makes it commercially one of the most successful products in the industry.
The latest Grand Theft Auto title was declared to be culturally British in 2015 by the Britsh Film Institute. This allowed Rockstar North to claim for video game tax credits. To qualify, a game needs to score a set amount of points for British settings, characters, development and cultural diversity.
Take-Two allocates minimal profits to its studios within the UK. Seven active companies using the Rockstar title declared a total profit of £47.3 million ($57.9m) before tax between 2013-2018. That is despite operating profits of games by Rockstar being an estimated $5 billion.
According to the report, should the profits have been divided more appropriately between the UK and US Rockstar North would have no claim on tax credits. However, Take-Two Interactive would have been liable for a substantial amount of tax in the UK.
“There is no evidence that HMRC has challenged this set-up or that Take-Two or any of the individuals named in this report has acted illegally,” reads the document.
“However, it is open for HMRC to challenge the allocation of profit under the transfer pricing system and we urge them to investigate this case urgently.”