UK Games Industry Growth Fastest Since Records Began

Record-breaking growth

A recent report by trade association TIGA shows that the UK games industry grew at a faster rate in 2019/20 than at any time since their annual reporting began in 2007/08.

Released last month, the report shows the number of creative staff in development studios rise by 12.2%. Indeed, in November 2018 14,353 people were involved in the industry compared to 16,836 in April 2020. Including contractors, the workforce increased from 16,532 to 18,279 over the same period.

A vital source of UK revenue

The report also shows that (both direct and indirect) revenue generated by the UK games industry topped £907 million in 2019/20, up from £747 million two years before. Studio investment also rose during this time, from £818 million in 2018/19 up to £993 million. This all means that overall, the UK games industry boosted the country's Gross Domestic Product to £2.2 billion, from £1.8 billion the previous year. Jobs in the industry also swelled, from 26,241 to 30,781.

TIGA's CEO Dr Richard Wilson OBE has said that the UK's Video Games Tax Relief has bolstered the health of the gaming industry in this country since its launch in 2014. Company’s availing of VGTR can receive a substantial portion of their games development costs back, reversing a yearly 3.1% decline from 2008 to 2011 (more about VGTR later).

A Video Games Investment Fund is also something TIGA have pushed hard for, and will continue to do so particularly in light of the pandemic. It’s also calling for additional cash for the UK Games Fund, designed to help gaming business scale up, innovate and take on the skilled employees they need.

Continuing growth

Throughout the lockdown, when everyone was stuck at home, the customer demand for PC, mobile and console games was very high. Research carried out by Unity compared global PC and mobile games usage for the period January to May 2020. The figures highlighted a 17% increase in daily mobile gaming and a 46% increase in daily PC gaming during the months of the lockdown.

However, the fact is that 73% of UK development studios are micro studios (employing four or fewer staff full-time). Whilst the industry has been thriving, the pandemic-induced economic downturn is starting to bite. What effects this will have on the industry long term are yet to be seen, making funding supports like VGTR all the more crucial.

How VGTR is supporting the UK games industry throughout the pandemic

The economic downturn brought about by the COVID-19 pandemic has seen businesses in all UK industries suffer to some degree. Whilst the damage is perhaps yet to be seen in the games industry compared to other sectors like leisure and hospitality, the long term effects of unemployment and reined in spending habits will still hit hard.

Back in the spring, Chancellor Rishi Sunak unveiled a range of COVID-19 support packages for business affected by the pandemic. Whilst many games companies will have availed of these, it’s also important to know that legacy schemes like R&D Tax Credits and VGTR are available. These schemes are specifically designed to support growth and innovation - vital tools in weathering the economic storm.

VGTR: What it is and how it works

Video Games Tax Relief (VGTR) is a lucrative government scheme that allows UK game developers to receive tax relief funding courtesy of HMRC. It’s sometimes also referred to as the UK Games Tax Relief Scheme.

Video Games Tax Relief forms part of the creative sector tax reliefs, covering not just gaming but also high-end television, animation and film production. In order to receive the tax relief, there are certain eligibility criteria that must be met, which we’ve looked at in more detail below.

Eligibility for VGTR

Firstly, the game must be classified as “British” by passing the Video Games Cultural Test administered by the British Film Institute (BFI). The test is pretty easy to pass - it checks things like whether the game is in English and whether it’s culturally appropriate.

Secondly, 25% or more of the game’s production costs must have been incurred in the European Economic Area.

And finally…

To claim VGTR companies must also:

• Be liable for UK Corporation Tax (having registered with Companies House)
• Not have created the video game in order to promote a specific brand or product. It needs to be for general supply.

The company must have overall responsibility for most of the video game’s development including:

• The game’s design, production and testing
• The active planning and the decision making through the game’s design, production and testing processes
• Directly negotiating the rights, contracts and other legal services associated with the game.

Note: Gaming companies don’t need to be directly responsible for all aspects of the above - it’s fine if some of it is contracted out. The point is that VGTR cannot be claimed if the company has simply commissioned another organisation to do the whole thing, whilst they themselves merely hold the creative copyright.

What types of games will attract the relief?

Video Games Tax Relief can apply to games developed on a huge range of platforms, including PC games, console games, and games designed for mobile devices like smartphones and tablets. As mentioned, games must also pass the BFI’s cultural test, and they must not be for the purposes of advertising or gambling.

We’ve put together some handy details covering everything you need to know about VGTR on our Video Games Tax Relief webpage. Don't forget to also see our recent blog: Financial Support Available For The UK Creative Sector.

Why Myriad Associates?

Myriad Associates is a leading specialist advisor in UK Video Games Tax Relief, alongside other innovation funding like R&D Tax Credits and R&D Grants.

Our friendly team of BFI application specialists, corporate tax experts and advisors have years of R&D funding experience behind them. We’re proud of our proven success rate in supporting clients to claim the VGTR they’re entitled to, throughout what can be a complex and time consuming process.

Thanks to our broad expertise and unique set of VGTR templates, we will support you in optimising your VGTR claim in an efficient, cost-effective manner.

Call us today on 0207 118 6045 or use our contact page and we’ll ring you back.