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U.K. Set to Give Videogames Tax Breaks

Government to offer incentives equal to those for film biz

The craftsmanship, artistry and importance of the rapidly evolving vidgames industry has long been recognized in the U.K. by BAFTA, which celebrated the sector with its ninth British Academy Games Awards at London’s Hilton March 5. Likely even more important to bizzers, however, is the proposed plan for a 25% tax credit for vidgame producers, due to go into effect in April.

The tax breaks, long lobbied for by the industry, which contributes around £1 billion ($1.5 billion) to the U.K. economy annually, means that the sector has earned the kind of economic respect afforded the film production biz, where a similar credit already exists.

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“It puts us on a more level playing field not just in the U.K. but internationally,” says Jo Twist, chief executive of Ukie, the association for U.K. interactive entertainment. “At 25%, that signals how seriously the government takes the games industry as a huge potential economic driver.”

Harvey Elliott, chair of BAFTA’s games committee, notes that games developers can ply their trade anywhere in the world, and that with many countries offering tax breaks and talent, the U.K. must do the same to remain part of the conversation.

“A number of projects started by big companies in the U.K. have been moving outside the (country) and there has been a degradation of the U.K. talent base,” Elliott says. “What the tax credit (will do is to help) put a finger in the dam. It keeps the U.K. competitive.”

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But the EU-regulated aid is not unconditional: A game must pass a cultural test to access the British break. It was announced in February that the government had appointed the British Film Institute to administer the same test for games it does for film.

A worry in the games industry, however, is that proving a game is British is difficult, especially in terms of content and its contribution to the promotion, development and enhancement of British culture, the two areas in which a project can most earn its stripes.

The cultural test is worked out in a points system, with a vidgame requiring at least 16 points to qualify for the tax credit. As many as 16 points are related to a game’s content, with four points available for its perceived contribution to British culture, three points are connected with whether the work was carried out in the U.K., and eight points attributed to personnel involved.

But as Elliott and Twist maintain, vidgames don’t fit as easily into a cultural test as filmed entertainment does. For instance, where would a game like BAFTA nominee “Lego: Lord of the Rings,” set in Middle Earth, fit on a cultural scale?“Not all games have a story or characters; they can be a lot more abstract,” Twist says.

Elliot says that as the first few games are evaluated, standards will emerge. “I do feel overall there are enough qualifying criteria that most games developed in the U.K. can validly apply for the tax credit,” he says.

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Still, Jessica Curry, co-director at Thechineseroom, whose “Dear Esther” received five noms at the recent Games Awards, is unsure how the process will work out for smaller studios like hers.

“The industry desperately needs tax breaks, so it’s a very good thing. However, like most small studios, what we really need to work out is the actual cost of accessing those tax breaks. It’s quite a complicated system, and that means either time to figure it all out yourself, or increased accountant’s bills. So it’s great in principle, but we will stay cautiously optimistic until we can get a sense of how easy it is to access the breaks, and what kind of overheads it will take to get them into place for us.”

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