Playing the system — delays to the new UK video games tax relief

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Introduction of the new video games tax relief, originally intended to be available from 1 April 2013, has been delayed as the European Commission has expressed doubts that the relief is necessary to incentivise video game development in the UK and has suggested that the introduction of the relief may distort the market and reduce competition in the sector. 

The Commission’s challenge does not mean that the relief will be abandoned, but the Government will need to convince the Commission that the relief is necessary to remedy market failures in the UK video games sector. We are awaiting the Government’s response to the challenge, which should give a better indication as to when the relief will be available and if any changes will be made to address the Commission’s concerns. 

The Government’s proposals for the relief should, if introduced in their current form, offer UK developers of games for commercial release (including apps) the opportunity to receive a cash tax credit from HMRC, or alternatively to reduce their corporation tax bill. It is intended that the relief will be available to UK companies incurring expenditure in the UK on the development of a “culturally British” video game. Set out below is a summary of the Government’s current proposals for relief, and how the relief may benefit video game developers…

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