Video Games Tax Break is axed by UK government

The proposed UK video games tax break is to be axed, according to the Emergency Budget published today by the new UK government.  The announcement follows several weeks of speculation about the new Government’s stance on the tax break, which followed the Conservatives first apparently promising pre-election support for the tax break but subsequently refusing to commit to it in their election manifesto.

Clearly, disappointing news for the games industry – particularly after the previous Labour government had promised to introduce the tax break if it won power for another term (more on that here).  What’s even more disappointing, however, is the Chancellor George Osborne’s comment that the proposed tax break was “poorly targeted“.  That, plus the wider austerity measures being proposed by the Government, drops a pretty heavy hint that the Government is going to take some persuading before it accepts the tax break in the future.

Cliona Kirby, a Tax Partner at Olswang (and expert on the games tax break), wrote on the Olswang Budget Blog about all this:

“After weeks of speculation, the Government has broken its silence on the topical issue of video games and decided to axe the relief announced by their predecessors. At a time when the UK needs to stimulate business in the UK this is very disappointing news. We are surprised that a relief aimed at keeping this growing and innovative industry in the UK was described as “poorly targeted”. The Financial Times recently reported that the global video games market will expand to be three times the size of the recorded music market by 2014. This announcement without doubt puts the UK video games industry on the back foot in terms of competing with other countries such as France and Canada that encourage both games companies and developers to relocate with the offer of targeted tax breaks. The effect of such continued corporate and individual migration will be a loss of revenues derived from the profitable games industry for the Treasury.

It is hoped that the Chancellor’s reference to “their longer term approach to intellectual property” and the “proposals on R&D in the Dyson report” will also benefit video games. We would strongly recommend that the Government looks to continue to develop the UK as a hub for the creative industries through incentives such as lower rates of corporation tax on intellectual property.”

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