Tax deal for shoot-'em-ups (as long as they're 'British')

Computer games developers and television drama producers will be offered tax breaks in return for using British characters and backdrops, under proposals drawn up by the Government.

The Treasury has approved an extension of Corporation Tax relief to the British video gaming industry, which contributes £1bn to the economy. The sector is facing a brain-drain as leading designers are attracted to countries which already offer tax breaks to games developers.

To be eligible for assistance, games companies must prove that their products are "culturally British". The Department for Culture, Media and Sport has published a test which potential candidates, such as the hugely successful Grand Theft Auto series, must pass.

Points will be awarded for games which are "set in the UK/European Economic Area or a fictionalised representation of the UK/EEA". Activision's Call of Duty series of first-person shooter games could qualify because of their Second World War setting.

Ministers are also proposing a tax break for "high-end television productions" and have begun a consultation to define what kind of quality programming would qualify. The aim is to repatriate prestige dramas like Parade's End, the recent BBC and HBO collaboration, which used Belgium for scenes of the British countryside to take advantage of a Belgian tax shelter scheme.

Points will be awarded for "telling a British story" and incorporating British or European characters, raising the spectre of token roles being written for English actors simply to boost eligibility. Television productions will have to gain 16 marks out of a maximum of 31 by meeting a range of different criteria.

After lobbying from the producers of science fiction and fantasy games, which are often set on alien planets, the Government has proposed that stories which are "set in a location/world that cannot be determined" can be called culturally British.

Alien life forms will also be assimilated into British society. The proposed test says points will be awarded for lead characters "who are British citizens or residents or of a nationality/species that cannot be determined." The games could be based around a UK "historical event", showcase "British technical or creative innovations such as Artificial Intelligence" and embrace cultural diversity, including representations of disability.

The tax breaks, backed by Ed Vaizey, creative industries minister, are due to be introduced next spring. A DCMS spokesman said: "We are now seeking views on a proposed cultural test that will identify culturally British video games, animation and high-end television that might be considered eligible for the new tax relief."

Richard Wilson, chief executive of UK games developers industry association Tiga, which lobbied for the tax break, said: "The cultural test is very encouraging because it is flexible and doesn't require a caricature of Britishness. The inclusion of unknown worlds means that a new Blake's 7 game for example, could qualify."

Mr Wilson hopes that the Grand Theft Auto series, which has used America's mean streets as the location for its orgy of destruction, might qualify as British since the games were developed by the Edinburgh company, Rockstar North, and incorporate British music on their soundtracks.

Small screen: British winners

Harry Potter and the Deathly Hallows

Although produced by an American company, the wizard's games console adventures could count as culturally British because JK Rowling is a Scot.

Titanic

Julian Fellowes' £13m ITV mini-series was shot in Hungary to take advantage of tax breaks, but would qualify for "high-end" assistance.

Sniper Elite V2

Shooter game created by British company Rebellious Developments loses ground for making the lead character an American officer.

Downton Abbey

Fellowes' biggest success would also qualify, as it has a British cast and makes lavish use of Highclere Castle in Berkshire.