Osborne scraps tax relief for gaming industry

Game production companies will not see the tax relief they were hoping for

George Osborne has scrapped Labour’s proposal to aid the gaming industry, stating that the new government will not offer tax breaks for game production companies in today’s emergency budget.

Osborne described Labour’s proposal of extending the 20 per cent tax break enjoyed by the film industry to the video games development sector as “poorly targeted”.

The subsidies that the previous government was set to offer games developers were never implemented and will no longer be offered.

"We will not go ahead with the poorly-targeted tax relief for the video games industry," said Osborne. “However, there will be a small reduction in the rates for capital allowances, which will remain broadly in-line with economic depreciation.”

In May, ELSPA, a group that lobbies on behalf of the UK games industry, spoke of its high hopes when Jeremy Hunt was appointed the new head of culture, Ed Vaizey appointed minister for culture, and Vince Cable the new head of business.

“All relevant new ministers are well aware of the needs of the games industry,” ELSPA director general, Michael Rawlinson said at the time.

However, ELSPA has reacted to today's news with disappointment.

“We are extremely disappointed by the outcome of today’s Budget. Our industry will be rightly puzzled as to how tax breaks can be lauded before an election, only to be seen as ‘poorly targeted’ and scrapped just six weeks later,” said Rawlinson.

“We understand that this decision has been made in the context of the current economic climate. Yet the chancellor today spoke of the need for a more balanced economy. If this is to be attained the government must acknowledge that the creative industries are of vital importance. Therefore, in the absence of tax breaks, it is essential that the government work with our industry to ensure that the policies which we have outlined - such as addressing the skills gap and better access to R&D initiatives - are implemented.”

ELSPA is not alone in voicing dissatisfaction at today’s announcement. Business advisory firm Deloitte said it was a blow to the UK games industry and could reduce the chance of international investment and new jobs in the UK.

“With lower average salaries than the US, a wide range of established and experienced studios and great talent across the industry, the UK is a great investment opportunity for major international games companies,” said Rupert Clark, video games expert at Deloitte.

"However, without a tax break, game development in the UK could appear risky when compared with countries such as France and Canada, where tax breaks are available," he added.

“UK games companies will now have to compete in a global market without the support provided to many of their competitors. Although the UK industry continues to be a strong performer, it has dropped from third in the world to fourth in the past two years and the scale of games produced in the UK could follow. The government has an opportunity in the next budget to support a growing employer and driver of export revenues.”