This report recommends boosting innovation in the UK video games industry by adjusting the R&D tax credit.

Key findings:

• Future prospects to the UK video games industry are not good.
• The modifications to the R&D tax credit proposed in this report would remove unintended obstacles that make it harder for UK video games companies to benefit from the scheme. 
• The policy recommendations are grounded in the distinctive nature of the industry’s R&D processes; they have only limited implications for other sectors.
• At the same time they promise to significantly boost innovation by video games companies.

The UK is home to a renowned video games development industry and is a place where global publishers have historically wanted to do business.

But in recent years making video games in the UK has become less attractive, as overseas territories have introduced generous tax breaks in a bid to retain and bring in investment and talent. This seems to explain the UK’s decline in the global league tables, from 3rd in 2008 to perhaps 6th place in 2010.

This report looks at how the R&D tax credit can be adjusted in order to help stop this decline.

Authors:
Hasan Bakhshi and Juan Mateos-Garcia