Video games lobby fights to claw back tax on R&D

The UK's video games trade body has opened up a second front in its campaign for tax breaks from the Government, proposing measures backed by the former Labour cabinet minister Stephen Timms.

Tiga has published a report today calling for improvements to the research and development tax credits. The measures could deliver up to 75 per cent more value to games studios, it said, adding: "This would enable studios to invest more in R&D, generate and retain new intellectual property, and hire more development staff".

Mr Timms, a member of the All-Party Parliamentary Group for the Computer and Video Games Industry, said Labour had supported the UK video games industry "and the current Government should do so in the coming Budget. They should also seriously consider Tiga's ideas for reforming R&D tax credits to benefit this billion-pound, world-leading industry."

The changes called for differ from the tax relief measures which Tiga is proposing specifically for UK games companies. The R&D relief, by contrast, applies to a range of industries.

Richard Wilson, the chief executive of Tiga, said he has not given up on getting relief for the video games industry but he added: "We thought it would also be sensible to have a second option on the table".

The Government is consulting on R&D tax credits, and Tiga's report proposes ways it can support the UK games industry. It hopes for news by the Budget this month.

Mr Wilson said: "Some games companies already use R&D relief to help offset the cost of technology processes and game engines, but its remit is pretty narrow at the present time."

Tiga's report suggests widening the relief to include other costs associated with developing a new game, adding that the rate of relief should be increased from 175 per cent to 200 per cent. It also asked for more assistance for loss-making game companies.

The games industry contributes about £1bn to the UK's GDP and employs about 9,000 people, according to Tiga. The body's chairman, Jason Kingsley, who is chief executive of Rebellion – the developer of Aliens Vs Predator – said: "If the Coalition Government wants to support highly skilled, hi-tech industries then it should look seriously at the proposals Tiga has set out and introduce these changes in the Budget on 23 March."

PricewaterhouseCoopers estimates the global video game market will grow from $52.5bn (£32.4bn) in 2009 to $86.8bn in three years.

The UK industry relies heavily on overseas investment, with 76 per cent of the money invested in domestic games development coming from global companies.

The industry had expected a tax relief scheme similar to the one the Coalition has introduced for the film sector. But despite pre-election pledges, the Government pulled support for the move in its June Budget.

Tiga said this leaves the UK "at a competitive disadvantage in the struggle to secure finance from overseas publishers," adding that "investment and jobs are drifting away to other countries". Canada in particular has tried hard to attract video games companies by offering tax breaks. Its efforts have paid off as Warner Brothers, Eidos-Square Enix and Ubisoft have all established studios in the country.

Tiga believes relief would safeguard 9,500 direct and indirect jobs and would more than pay for itself.

The Culture minister, Ed Vaizey, has tried to maintain good relations with the industry, urging schools to offer pupils computer programming training and promote skills needed for video gaming and special effects.

The Government also backed last month's launch of the Next Gen review by Ian Livingstone, the life president of Eidos, and Alex Hope, the managing director of Double Negative.

It was well timed "to make a contribution towards the evidence for the Government's current Growth Review for the digital and creative industries," Mr Vaizey said.

The gaming industry in numbers

$52.5bn Value of the global video game market in 2009, which is estimated to grow to...

$86.8bn in the three years to 2012.

9,000 Number of people in the UK employed by the sector, which contributes about...

£1bn to the UK economy.