UK game tax breaks approved by European Commission

The European Commission has lifted its block on tax incentives for UK game companies. It comes a year after the block was set in place by the Commission.

Develop reports that the EC confirmed that the 25% tax rate now also applies to game developers based in the UK, provided they pass a cultural test, which was first unveiled in December 2012.

The body stated, "The European Commission has concluded that UK plans to grant certain tax relief to producers of video games are in line with EU state aid rules. The Commission has found in particular that the measure provides incentives to developers to produce games meeting certain cultural criteria, in line with EU objectives."

To become eligible for tax breaks, a company must reach 16 points in the test, which will appraise games and their creators on several criteria. For example, four points are awarded if 75% of a game is set in the UK, and depending on how many characters are British. The EC estimates that 25% of British games will be eligible.

Commenting on the news, the EC's VP in charge of competition policy Joaquin Almunia said, "Our initial doubts have been dispelled. The proposed aid for video games is indeed focusing on a small number of distinctive, culturally British games which have increasing difficulties to find private financing."

Then, in a statement sent to VG247, UKIE CEO Dr Jo Twist said, “This is a huge boost to the UK games and interactive entertainment sector and the start of a great new era of games production in the UK. We are delighted the European Commission recognised the clear market failure for the production of games with a British and European flavour, using UK-based creative and highly skilled talent.

“We are extremely happy to have played a part, as a strong collective voice for the industry, to get the scheme over the finishing line. We have been in constant contact with government throughout the process and have applied pressure and evidence for the scheme to be introduced at every opportunity.

“I’d like to thank all the hundreds of games companies and individuals across the country who have worked so hard collectively and who have played such a crucial role in getting to this point. The next strategic priority for us now is in applying pressure in different ways so that games businesses can access more programmes which support access to international markets, training and finance so we can be fully recognised as a sector that can lead the world again.”

The tax break announcement follows years of lobbying from UK developers, industry figures and groups UKIE and TIGA. Campaigning began in 2008, after several industry bodies took the matter to Westminster, only to see the incentives approved and then scrapped twice for various reasons.

After George Osborne expressed his support of the incentives in May 2013, the campaign began anew, and with new conviction. However, after tax breaks were notably absent from the recent UK budget, hopes were cooled until today's announcement saw the motion passed.

According to TIGA - via CVG - the decision will see £188 million investment for Britain's games development sector.