Video games tax relief evaluation

Ipsos was commissioned by HM Revenue and Customs (HMRC) to undertake qualitative research with UK video games developers to explore the impact of Video Games Tax Relief (VGTR) on the production of culturally British and European video games.

Ipsos was commissioned by HMRC to carry out qualitative research with UK video games developers to explore the impact of VGTR on the production of culturally British and European video games. Developers’ awareness and perceptions of the relief, approaches to the application process, and the wider impact of VGTR on individual developers and the industry as a whole were explored.

VGTR is one of seven creative industry tax reliefs in the UK tax system, offering UK developers tax relief on a proportion of the development costs of qualifying video games. It was introduced in 2014 specifically to incentivise the production of culturally British and European video games.

Findings

  • There was a general sense that awareness of VGTR in the industry was high.
  • Barriers to applying for the relief included a perceived lack of return on the relief (due to high agent fees or low project value), assumptions around the complexity of the process, and misperceptions about eligibility criteria.
  • Overall, the process of applying for and receiving VGTR compared favourably to the Research and Development (R&D) Tax Relief application.
  • VGTR was seen as enabling developers to transition from work-for-hire, into developing original games. VGTR money was used to overcome financial barriers, such as the cost of building prototypes, and licensing fees, as well as funding longer development schedules and the hiring of specialist staff. This was perceived to make it more likely for games development to get off the ground, and to improve the quality of the games produced.
  • There was evidence of businesses becoming more sustainable, professionalising their financial monitoring and recordkeeping, and using VGTR to find new investors.
  • Developers felt VGTR was setting the UK industry on a path to becoming globally competitive again, and had stemmed the brain drain of UK talent, but that it was too soon for the full effect of the relief to be felt.

Technical details

A total of 51 in-depth interviews were undertaken between August and November 2016 with UK video games developers, sampled from HMRC records of those who had applied for VGTR, and manually-sourced sample.

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