Research conducted by The Independent Game Developers’ Association (TIGA) in December 2021 shows that almost three-quarters of UK games companies are expecting to see the industry grow in 2022.
What does it mean for the accountancy industry? With the rise of game developer companies, there will undoubtedly be a rise in Video Games Tax Relief as they search for new and innovative games and technology.
The Findings of TIGA’s Research
TIGA’s Business Opinion Survey (BOS) asked 57 UK games businesses, including small, medium, and large enterprises working in games development either for PC, console, tablet, mobile or VR, their plans and hopes for 2022.
Note: Percentages are rounded up, thus not always adding to 100%.
The findings of the survey are very hopeful. 68% of the companies surveyed plan to grow their workforce during the year. At the same time, 70% believe that the UK is an advantageous location for the games industry to develop and grow.
The Key Figures
Some of the key areas the survey looked at were:
- Employment: 68% of companies plan to increase their workforce in the next 12 months. 30% expect their numbers to stay the same, and only 2% believe they will lose staff.
- Costs: A large majority of companies, 83%, anticipate costs (for example, staffing and overheads) to increase during the year.
- Performance: The majority of companies, 60%, believe their business is performing “well” or “very well”, which is slightly below last year’s 70%. 32% said they are performing “neither well nor badly”. While 9% of companies said, they are performing “badly” or “Very badly”, which is slightly better than 11% last year.
- Prospects: Just over half the companies who took the survey, 53%, are optimistic about 2022 compared to the previous year. 35% were neutral regarding their prospects, while 12% were less hopeful.
- Obstacles to Success: The findings show 40% of the surveyed businesses mentioned skills gaps and shortages as the main obstacle to success (up from 25% last year). Discoverability was mentioned by 19% of those surveyed (down from 36%). Other issues mentioned were: 18% cited limited access to finance. 7% said the disruption caused by the pandemic, and 4% cited difficulties accessing games engines, middleware, and tools.
Dr Richar Wilson, OBE, CEO of TIGA, had this to say:
“The UK video games industry is on track for growth, with 68 per cent of respondents to our Business Opinion Survey expecting to increase employment over the coming year. However, skills shortages and access to finance remain challenges for some studios and competition for foreign direct investment in the games industry is likely to remain significant.
The Government can strengthen the sector by taking three actions. Firstly, enhance Video Games Tax Relief (VGTR) by raising the rate of relief from 25 to 32 per cent to promote growth in the sector. Secondly, introduce a Video Games Investment Fund (VGIF) to improve studios’ access to finance. The VGIF would provide funding of up to £500,000 available to games businesses on a matched funding basis. Thirdly, increase the supply of well-educated graduates who can work in the games industry and promote training in the sector via a Skills Investment Fund.
How can Video Games Tax Relief Benefit You & Your Business?
Despite the industry demanding changes and improvements, Video Games Tax Relief (VGTR) is still one of the most popular tax reliefs in the UK. It is part of the country’s creative industries tax reliefs and is designed to encourage innovation within the games industry.
Games developer companies can claim the relief to help cover the costs of developing British video games upon passing the BFI’s cultural test. There is a significant variation of qualifying expenditure – from designing and developing to bug fixing and testing.
The relief is typically an enhanced deduction of expenditure for Corporation Tax. However, there are circumstances where a cash credit may be claimed.
To qualify for VGTR, video games must:
- Be intended for the supply to the general public.
- Pass the previous cultural test and be certified by the Secretary of State as British.
- Have incurred at least 25% of the core expenditure on goods and services from inside the European Economic Area (EEA).
- Not be for advertising or promotional purposes or gambling.
Any UK games business can claim thousands of pounds back through the VGTR. However, getting expert advice and support throughout the process is vital for a successful claim. Without it, there are higher chances of your claim failing and you losing out on the relief.
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