The European Commission believes there is “no obvious market failure” in the UK games sector to provide tax relief to developers, and has opened an in-depth investigation into the proposed scheme backed by the industry and trade groups.
The UK has intended to introduce 25% tax relief on a maximum of 80% of a firm’s production budget should the video game qualify.
However, the commission wonders whether such aid is necessary to stimulate video game production, and feel it would not “fuel a subsidy race between Member States.”
“The market for developing video games is dynamic and commercially promising,” said Joaquin Almunia, Commission VP. “It is not clear whether the taxpayer should be subsidising this activity.
“Such subsidies could even distort competition.”
It was also questioned whether “limiting expenditure for the tax relief to goods or services ‘used or consumed’ in the UK would not be discriminatory,” reports GI International.
The commission is also concerned whether the cultural test developers would have to undertake would ensure the relief would support only games “with cultural content without leading to undue distortions of competition.”
Trade bodies UKIE and TIGA, both huge supporters of the scheme, expressed disappointment in yet another delay to relief, and plan to continue pushing the matter.