Ukie has submitted its response to the audio-visual tax reliefs consultation, in which it urges the Government to take a “do no harm” approach to the Video Games Tax Relief (VGTR), ensuring that the overall scheme remains attractive, accessible and effective for all sizes of games company as it has been since its introduction in 2014.

Ukie notes that the consultation, which aims to revisit the structures of the UK’s audio-visual tax relief regime, including VGTR, recommended the following changes to VGTR:

• removing the eligibility of European expenditure from VGTR and replacing it with a requirement for expenditure to be “used or consumed” in the UK;
• revising or removing the current subcontracting cap of £1 million and seeking views on whether companies would be likely to raise or lower their level of subcontracting if European expenditure is excluded; and
• removing the 80% qualifying expenditure cap, but potentially lowering the overall credit rate, to avoid a substantial additional cost to the taxpayer.

In the wake of the consultation, Ukie launched an industry-wide survey and met with industry and Government officials to inform its formal response. Ukie says that the responses throughout the survey and Ukie’s wider engagement paint a clear picture: 89% of respondents agreed that since its introduction in 2014, VGTR has provided vital support to grow the video game industry, being a net positive relief supporting developments from the smallest independent game development studio through to the largest AAA productions.

Accordingly, Ukie has called on the Government to maintain the generosity and simplicity of any new regime, believing that there are opportunities to enhance the effectiveness of the relief, including by considering further policy changes, such as skills investment and co-development treaties. Ukie says that it will continue to engage with relevant departments as the consultation progresses through the next stages.

The key points made by Ukie in its response include:

• there is an overarching need to ensure that any reforms to VGTR do not affect its generosity or competitiveness in comparison to international alternatives;
• the removal of EEA expenditure from qualifying expenditure in VGTR claims would have a negative impact on UK games companies;
• removing the eligibility of EEA expenditure is likely to increase costs for businesses which would not be balanced out by a removal or revision of the subcontracting cap;
• there is the risk of unintended consequences if these measures are carried out at pace without a corresponding look at skills education, talent pathways, as well as further measures to increase the competitiveness of VGTR internationally;
• more information is needed from HMT/HMRC on “used or consumed” definitions, as well as clear information around the timetable for implementation of expenditure credit system to allow businesses to plan for these changes;
• new US tax rules must be prepared for; and
• the Government should explore ways in which VGTR can be expanded to encourage co-development projects as is the case in Film and High-end TV.

To read Ukie’s press release in full and for a link to the full response, click here.