The European Commission (“Commission”) has opened an in-depth investigation into the proposed UK video games tax relief.  

The Government has set out draft legislation in the Finance Bill that would, if enacted, create a new ‘Games Tax Relief’ (“Relief”). The Relief would allow developers and technology firms involved in the UK gaming industry to benefit from a 25% reduction on 80% of the corporation tax ordinarily owed on the production budget of a qualifying video game.

The objective of the measure is to provide an incentive to video games developers to produce games meeting certain cultural criteria.

However, the Commission has cast doubts over the necessity of providing aid to what it considers is a “dynamic and commercially promising” market. Based on the information available at this stage, the Commission doubts whether:

  • aid is necessary to stimulate the production of such video games;
  • limiting expenditure for the tax relief to goods or services 'used or consumed' in the UK would not be discriminatory;
  • offering this type of aid would not fuel a subsidy race between Member States; and
  • the proposed cultural test ensures that the aid supports only games with cultural content without leading to undue distortions of competition.

As part of its investigation, the Commission invited interested parties to comment by 15 May 2013.  

Link to Commission press release: http://europa.eu/rapid/press-release_IP-13-333_en.htm?locale=en