UK trade bodies Ukie and TIGA have called on the Government to improve the tax breaks available to the games industry after the measure was left unaddressed in this week's Autumn Budget.
The industry received only briefly mentioned in Wednesday's announcement. Chris Buckden, media and creative tax consultant at Moore Kingston Smithtells GamesIndustry.bizThese are all minor changes.
“Specific changes to the video game tax credits are limited to administrative changes in relation to the transition of companies from the video game tax credits (VGTR) – the 'old' regime – to the video game expenditure credits (VGEC), which potentially apply for significant expenditure outside the UK, and clarification regarding payments for the transfer of incentives between group companies,” he said.
In addition to the tweaks specific to video games, companies should pay attention to some general changes. Dividend tax rates have been increased, which will impact owners and directors of companies that pay themselves dividends rather than receive significant salaries. Limits for Enterprise investment scheme (EIS) and Venture Capital Trust (VCT) are investor assistance schemes that Buckden says can boost the investment potential of UK residents – and the restrictions that apply to Incentives for business management (EMI) option schemes. Such schemes allow companies to grant stock options to employees.
On the last point, Buckden explains that this will allow “large companies to attract and retain talent in a way that is not just through salaries and bonuses”, although for studios with fewer than 250 staff this is a “moot point” as they already meet the criteria.
For those lucky enough to own a company, especially those looking to exit it, selling it to an Employee Property Trust is now slightly less attractive as only 50% of the giants will be eligible for capital gains tax relief; Previously it was 100%.
Finally, changes have been made to how pension contributions work under salary sacrifice; Buckden says they are “slightly less tax efficient” as National Insurance contributions are capped at £2,000. However, there are still four years before this law comes into force.
Both Ukie and TIGA say improving VGEC would be a net positive for the economy, a particularly pressing issue as Reeves and the Labor government focus on economic growth.
“Today's Budget sets out measures to address immediate financial pressures as the Government seeks to deliver long-term economic growth. Looking ahead, we remain confident that targeted measures for the UK games and interactive entertainment industry can deliver significant economic and cultural value for the UK.” UKIE chief executive Nick Poole wrote about this on the trade body's website..
“Introducing significant improvements to the UK tax credit system, particularly VGEC, will give studios the support they need to scale, create high-quality jobs and compete globally.
“We will continue to work constructively with ministers and officials to make the case for this support, along with other policy measures, to support the UK's pioneering video games and interactive entertainment industry. We have the talent, ideas and potential to drive economic growth and, with the right policy environment, we can help deliver the investment and innovation the country needs.”
These comments were echoed by TIGA CEO Dr Richard Vilon.which cited previously published research conducted by the trade body, which shows that improving VGEC could create over 6,000 new jobs..
“Today's Budget showed the Chancellor is focused on rebuilding her fiscal headroom to meet her key budget rules. The Government needs to boost economic growth across the UK,” he wrote.
“The video game industry can support this goal. Our industry generates £12 billion in gross value added (GVA) annually, supports over 73,000 jobs (including approximately 28,000 developers) and contributes £2.2 billion in tax revenue.
“The best way to accelerate the growth of the UK video games industry is to expand our VGEC. A VGEC reduces game development costs, which in turn stimulates investment and the creation of high-skilled jobs in the sector. TIGA research, carried out in conjunction with the University of Portsmouth, shows that a VGEC at 53% of qualifying spend on games with a budget of up to £15 million could create over 6,000 jobs, including over 800 development roles, while generating tax revenue for HM Treasury will support economic growth and ensure the UK continues to lead the way in games development. TIGA will continue to advocate for the expansion of VGEC.”
Ukie and TIGA recently signed an open letter to the UK government calling for support for a new plan to help games grow. which they say could help create “thousands of high-quality jobs.”
