Sega, Sony, and WarnerMedia are three industry titans named in a report by The Guardian that stated these companies have exploited the Video Games Tax Relief initiative to avoid paying millions of pounds in corporate tax.
In 2014, the Video Game Tax Relief was set up as a specific points-based test on the cultural significance of the video game. Its score would be judged by the British Film Institute upon factors such as its setting, the location of the development process, and whether the title ‘reflects British creativity’. If studios score over half of a possible 31 points, they qualify for the tax break and are able to claim up to 20 per cent of production costs.
It’s intended for small-scale studios, but the kingpins are well within their rights to apply for the tax break as well. Worries were sparked that the Video Games Tax Relief initiative would ‘create substantial additional avoidance opportunities’, and this report from The Guardian suggests that the concerns were well-founded.
A chunk of the Video Games Tax Relief fund goes to companies outside of the UK, often to big name publishers. These claims average at about £500,000 each, taking up approximately 80 per cent of the total Video Game Tax Relief. Sega has claimed £20 million in corporate tax relief according to its UK subsidiaries’ audits, and Sony has soaked up £30 million. WarnerMedia, the conglomerate behind the studios that developed the Lego and Batman: Arkham series, left these two companies in the dust. The American media and entertainment firm has taken £60 million in tax relief, as stated by The Guardian.
Applications that claimed a maximum of £50,000 accounted for over half of all submissions, but these total a slice of £10 million from the £324 million intended for the small-scale studios. The tax relief initiative has ‘become a cash cow for large, tax-dodging multinational corporations who are milking the system to extract hundreds of millions of pounds in subsidies from the British taxpayer,’ according to Alex Dunnagan, a researcher at TaxWatch UK.
‘It is clear to me that much of the subsidy is unnecessary, as many of these corporations were producing hugely popular games since long before the introduction of VGTR,’ they added. Earlier this summer, Rockstar North was spotlighted by TaxWatch and accused of paying no corporation tax between 2009 and 2018. The developer accrued an estimated profit of £4.1 billion during that time period.
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