Video Games Tax Relief gets axed

Cliona Kirby, Tax Partner, CMS

After weeks of speculation, the Government has broken its silence on the topical issue of video games and decided to axe the relief announced by their predecessors.   At a time when the UK needs to stimulate business in the UK this is very disappointing news.  We are surprised that a relief aimed at keeping this growing and innovative industry in the UK was described as “poorly targeted”.     The Financial Times recently reported that the global video games market will expand to be three times the size of the recorded music market by 2014.  This announcement without doubt puts the UK video games industry on the back foot in terms of competing with other countries such as France and Canada that encourage both games companies and developers to relocate with the offer of targeted tax breaks.  The effect of such continued corporate and individual migration will be a loss of revenues derived from the profitable games industry for the Treasury.

It is hoped that the Chancellor’s reference to “their longer term approach to intellectual property” and the “proposals on R&D in the Dyson report” will also benefit video games.  We would strongly recommend that the Government looks to continue to develop the UK as a hub for the creative industries through incentives such as lower rates of corporation tax on intellectual property.

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