Game Developers, Game Companies & Tax Breaks for Game Development

The recent UK budget produced a raft of media criticism. Chancellor George Osbourne has received a lot of bad press for his “pasty tax” (extra tax on hot, takeaway, food essentially) and the usual increases in tax on fuel, alcohol and cigarettes have produced ire from the usual selection of consumers and businesses. One piece of pleasant news though, for UK gamers at least, was a surprise announcement that companies making video games would receive significant tax cuts.The move seems like a shrewd ploy to boost the UK economy; the games industry is currently the biggest entertainment industry in the world with profits currently at $50 billion per year worldwide and rising. Countries such as France and Canada have seen an influx of games developers due to similar tax breaks for games developers.

There are many people who will see this tax break as a just reward; the UK’s history in the field of game production has been incredible considering the small size of the island. The UK was one of the few countries to have a successful video game industry during the great videogames crash of the early 80’s; with many UK companies avoiding costly and failing cartridge based consoles such as the Atari 2600 and releasing low priced titles for cassette based computers such as the ZX Spectrum and Commodore 64 instead. These companies continued to innovate into the 16-bit era producing titles such as Lemmings and Micro-Machines for PC, Sega and Nintendo. Perhaps the biggest recent success stories from the UK though are the Tomb Raider, Little Big Planet and Grand Theft Auto series; Lara Croft being created in Derby, Sackboy coming from London and GTA racing out of Dundee respectively.

But what will the tax breaks mean for the industry in the UK? Well, it will encourage small businesses within the games industry to flourish for one thing. Independent games companies have long had to rely on accounting services or small business accountants to reduce tax to levels where they can operate at a productive level. With the new tax break offering even more financial benefits to small businesses in the industry, these companies can concentrate on the important work – creating brilliant new games. Some great indie games such as Limbo have been released in the UK recently and hopefully these tax breaks can help produce more.

It is also hoped the tax cuts will attract large games companies from around the globe. The UK has lost offices from game giants EA and Activision in the last decade and perhaps these tax cuts could see them return. Similar UK tax cuts for film companies have seen upcoming Hollywood pictures World War Z, Under the Skin and The Dark Knight Rises use Scotland’s capital Glasgow, as “city double” for Philadelphia, Chicago and Gotham.Kevin Ball is a marketing executive for Search Laborator; Kevin blogs on a variety of topics including tax, small business accounting, accounting services and how they relate to digital entertainment.

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